Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Whether treaty benefits flow through to partners of an LLC
Position: No
Reasons: An LLC is not considered a flow-through entity.
1997 Tax Executives Institute Conference
Question XVII
U.S. Limited Liability Company
Revenue Canada is of the view that limited liability companies (LLCs) created under the limited liability company legislation of certain U.S. States are corporations for the purposes of the Act. Moreover, the Department is of the view that a LLC that is a corporation would be considered resident in the United States for the purposes of the Act, if its mind and management resides in the United States. However, Department takes the view that a LLC which is treated as a partnership under the Internal Revenue Code of the United States does not qualify as a resident of the United States for the purposes of the Canada - U.S. Income Tax Convention (the "Convention") under Article IV thereof, for the reason that such LLC is not subject to tax in the United States. As a result, such LLC does not qualify for any of the benefits that are available to a person who is a resident of the United States for the purposes of the Convention.
Is Revenue Canada willing to provide administrative relief where a LLC can demonstrate that all its shareholders are U.S. corporations that qualify as resident of the United States under the Convention?
Department’s Position
No. Where based on its attributes a LLC is considered to be a corporation, the LLC is considered to have a legal personality and existence that is distinct from the persons who caused its creation or who own it. This being the case, at this time the Department has no basis on which to look through to the residency of such persons for the purposes of providing relief under an income tax convention.
Prepared by: Olli Laurikainen
November 14, 1997
File: 972978