| 921987 | |
| 19(1) | Olli Laurikainen |
| (613)957-2116 |
Attention: 19(1)
September 11, 1992
Dear Sirs:
Re: Definition of Canadian-Controlled Private Corporation
This in reply to your letter dated June 26, 1992 wherein you inquired whether a corporation controlled by a person who is deemed to have been resident in Canada throughout a taxation year for purposes of the Income Tax Act (the "Act") by paragraph 250(1)(a) thereof, but who is resident in another country for the purposes of an income tax treaty, would satisfy the definition of Canadian-controlled private corporation ("CCPC") in paragraph 125(7)(b) of the Act.
Paragraph 250(1)(a) of the Act applies to individuals who are otherwise resident in a country other than Canada and who sojourned in Canada for a period of, or periods the aggregate of which is 183 days or more. Such individuals are deemed to have been resident in Canada throughout the taxation year for the purposes of the Act and would, subject to any exemptions available in a tax treaty, therefore be subject to tax in Canada on their world income.
In our view a corporation controlled by such an individual would qualify as a CCPC provided it otherwise meets the definition in paragraph 125(7)(b) of the Act and it would be irrelevant that the controlling individual shareholder is resident in another country for the purposes of a tax treaty. However, in the event the individual's sojourn in Canada cannot reasonably be considered to have been undertaken or arranged primarily for a purpose other than to obtain a tax benefit (i.e. the small business deduction for the corporation), subsection 245(2) of the Act may apply to eliminate that benefit.
We trust the above is of assistance to you.
Yours truly,
for DirectorReorganizations and Foreign DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch