| 19(1) | File No. 5-8510 |
| R.C. O'Byrne | |
| (613) 957-2126 |
January 31, 1990
Dear Sirs:
Re: Non-resident owned investment corporation (NROs)
This is in reply to your letter of August 10, 1989 in which you asked a question about the following hypothetical situation:
1) An NRO is established in a particular year (the "initial year").
2) It has taxable income and pays income tax in respect of that year.
3) Early in the second taxation year, before it receives the notice of assessment for the initial year, the NRO will pay a dividend.
4) The NRO wishes to generate a refund of the refundable tax paid in respect of that initial taxation year.
YOUR QUESTION
You have asked whether the NRO can apply for the allowable refund created by the payment of the dividend pursuant to paragraph 133(6)(b) of the Act after it receives its notice of assessment for the initial year.
OPINIONS
The preamble of paragraph 133(8)(a) reads in part that `"allowable refund" of a non-resident-owned investment corporation for a taxation year means the aggregate of amounts each of which is an amount in respect of a taxable dividend paid by the corporation in the year on a share of its capital stock__.' Accordingly, the dividend paid by the NRO early in the second taxation year would create allowable refund for the second taxation year.
Paragraph 133(6)(a) points out that the Minister "may, upon mailing the notice of assessment for the year, refund without application therefor its allowable refund for the year." The year referred to in paragraph 133(6)(a) in this case is the same year as the year referred to in paragraph 133(8)(a). Accordingly, the allowable refund created by the NRO during the second taxation year in the situation described above could not be refunded under this provision until the mailing of the notice of assessment for the second taxation year.
Paragraph 133(6)(b) describes how an NRO can apply for a refund of its allowable refund for the year. This provision indicates in part that the Minister "shall, with all due dispatch, make such a refund after mailing the notice of assessment if application therefor has been made in writing by the corporation". The reference to "refund" in this provision refers to the NRO's "allowable refund for the year" described in paragraph 133(6)(a). The reference to "notice of assessment" in this provision refers to the "notice of assessment for the year" described in paragraph 133(6)(a). Consequently, an application for a refund of the allowable refund created by the NRO during its second taxation year may not be made until after the NRO receives its notice of assessment for the second taxation year.
ADDITIONAL COMMENT
The Department does not normally grant administrative relief to offset the allowable refund available to the NRO against the liability under section 212 to withhold and remit tax on the payment of the dividend to the non-resident shareholder.
We trust this will be of assistance to you.
Yours truly,
for DirectorReorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch