July 8 1991
Dear Sirs:
Re: Proposed Subsection 250(6)
This is in reply to your letter dated April 12, 1991 concerning proposed subsection 250(6) of the Canadian Income Tax Act (the "Act"). We also refer to our telephone conversations (G. Arsenault and 19(1) on May 22 and June 14, 1991.
References herein to proposed subsection 250(6) of the Act are references to that proposed subsection as set forth in subsection 194(1) of Bill C-18 tabled by the Minister of Finance on May 30, 1991.
You have requested our views concerning a corporation that rents on a "time charter basis" the ships it uses in its business of transporting goods by sea. It also rents the services of the crews required therefore. The corporation is responsible for every aspect of the transportation operation: for example, it has complete control over the following elements:
1) The ship and its usage;
2) The nature of the goods to be transported;
3) The ship's crew. In this respect, the corporation:
- can determine the way the ship should be loaded,
- can choose the port agent and stevedores that should be used (the corporation pays for their services);
- can ask for the replacement of the captain if it is not satisfied with his performance;
4) The place from which the ship will be bunkered and the identity of the supplier, the corporation pays for the bunker;
5) The place where delivery of the goods is taken;
6) The destination of the goods; and
7) The place of taking delivery of the ship at the start of the time charter agreement and the place of redelivery of the ship after the expiration of the charter agreement (within a certain range as determined by the charter agreement).
In our opinion a corporation which rents on a time charter basis as described above the ships and crew used in its business of transporting goods by sea is engaged in the operation of such ships and can be within the purview of proposed subsection 250(6) of the Act.
Our opinions herein are premised on the assumption that proposed subsection 250(6) of the Act is enacted. Nothing herein should be construed as constituting an assurance or representation that proposed subsection 250(6) or any other proposed amendment of the Act will be enacted.
Yours truly,
for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch