Principal Issues: Whether a French société civile de placement immobilier is a partnership or a corporation for Canadian tax purposes.
Position: A “société civile de placement immobilier” is viewed as a corporation for Canadian purposes.
Reasons: The characteristics of a “société civile de placement immobilier” more closely resemble a corporation than other forms of business association under Canadian commercial law.
XXXXXXXXXX 2022-092943
XXXXXXXXXX 2022
Dear Mr. XXXXXXXXXX,
Subject: Request for advance income tax ruling
XXXXXXXXXX
This is in response to your letter dated XXXXXXXXXX requesting an advance income tax ruling on behalf of XXXXXXXXXX (the “Taxpayer”). We have also taken into account the information you have sent us by email, as well as additional information submitted during telephone conversations (XXXXXXXXXX).
To the best of your knowledge and that of the taxpayers involved, none of the proposed transactions or issues involved in this Ruling request are the same as or substantially similar to transactions or issues that are:
i. in a previously filed tax return of the taxpayers or a related person and:
A. being considered by the CRA in connection with such return;
B. under objection by the taxpayers or a related person; or
C. the subject of a current or completed court process involving the taxpayers or a related person; or
ii. the subject of a Ruling request previously considered by the Income Tax Rulings Directorate.
Unless otherwise indicated:
i. all statutory references are to provisions of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as amended (the “Act”);
ii. all words and expressions used in this application and defined in the Act shall have the meaning given to them in the Act;
iii. all monetary amounts are in Canadian dollars;
iv. words importing the singular number only shall include the plural and vice versa where the context so requires.
Facts
1. The Taxpayer is a société civile de placement immobilier (“SCPI”) [real estate investment company] governed by Articles 1832 et seq. of the Code civil français [French Civil Code], Articles L.214-86 et seq. and R214-130 et seq. of the Code monétaire français [French Monetary Code], the Règlement général de l'Autorité des marchés financiers français et ses statuts constitutifs [General Regulations of the French Autorité des marchés financiers and its articles of incorporation;
2. The Taxpayer is a resident of France within the meaning of French tax legislation, the Act, and the Convention Between Canada and France for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital signed on May 2, 1975, and amended by the protocols entered into between the Contracting States on January 16, 1987, November 30, 1995 and February 2, 2010 (the “Convention”);
3. The Taxpayer was formed on XXXXXXXXXX for a term of XXXXXXXXXX years;
4. The purpose of the Taxpayer is the direct or indirect acquisition and management of a rental property portfolio (XXXXXXXXXX). In particular, the Taxpayer may carry out works of any kind on immovables and acquire equipment or installations necessary for the use of such immovables;
5. The Taxpayer's registered office is located in France;
6. The Taxpayer's original share capital was constituted without a public offering. It was divided into XXXXXXXXXX registered shares, which were allocated to the founding partners/subscribers;
7. On XXXXXXXXXX, the Taxpayer had XXXXXXXXXX partners, almost all of whom are French tax residents, within the meaning of French tax legislation, the Act and the Convention, and had a share capital of more than XXXXXXXXXX;
8. Under its articles of formation and the relevant French legislation, the Taxpayer does not have the option of holding immovables through foreign corporations. It must hold its real estate portfolio directly;
9. The Taxpayer is managed by the XXXXXXXXXX corporation which is a société anonyme [limited company] registered with the Registre du Commerce et des sociétés français [French Trade and Companies Register] and resident in France within the meaning of French tax law, the Act and the Convention;
10. For French tax purposes, an SCPI is not subject to corporation tax. It is the partners/subscribers who are allocated a portion of the income and losses in proportion to their interests once those have been determined at the level of the SCPI and who are ultimately liable for the resulting tax;
11. Under French law, an SCPI has legal personality and the capacity to enter into contracts with third parties. It has its own assets and is liable for the debts it may incur. In this respect, the liability of partners/ subscribers is limited to the amount of capital subscribed;
12. There is no legal vehicle under Canadian law with characteristics absolutely identical to those of a SCPI.
Proposed Transaction
The Taxpayer plans to acquire a XXXXXXXXXX rental property located in Canada in accordance with its investment and diversification policy.
Purpose of the Proposed Transaction
The Taxpayer wishes to expand its business activities and develop new business opportunities in Canada.
Rulings
Provided that the statement of the relevant facts, proposed transaction and additional information constitutes full disclosure of all relevant facts regarding the proposed transaction and the purpose of the proposed transaction and that the proposed transaction is carried out as described above, the CRA confirms that:
A. For purposes of the Act, the Taxpayer is a “corporation” as defined in subsection 248(1) of the Act.
B. For the purposes of section 216 of the Act, the Taxpayer is a “person” who could file a return of income under Part I of the Act in respect of the payment of rents from real or immovable property situated in Canada to the extent that the other conditions set out in section 216 of the Act are satisfied.
C. For the purposes of the application of the Convention by Canada, the Taxpayer is a “company” within the meaning of the definition of the term “company” in Article 3(1)(c) of the Convention.
These rulings are subject to the general limitations and qualifications set out in Information Circular 70-6R12 dated April 1, 2022, issued by the CRA and are binding on the CRA provided that the proposed transaction described is completed within six months of the date of that letter. These rulings are based on the current Act and do not take into account any proposed amendments thereto.
Other Comments
Nothing in these rulings should be construed as suggesting that, subject to Ruling B, the CRA agrees with or has considered the tax consequences that may result from the classification of the Taxpayer as a corporation for purposes of the Act or the Treaty or the Proposed Transaction described herein.
A statement of our fees for the time spent reviewing your file will be sent to you under separate cover.
Best regards,
XXXXXXXXXX
for the Director
International Operations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch