Q. 5(a) Super-voting shares
Where a company has multiple classes of voting shares, with one or more of the classes thinly traded or not at all, each class of shares should be considered separately when determining whether those shares are "primarily and regularly traded" for purposes of Art. XXIX-A(2)(c) of the Canada-U.S. Convention. A ruling request for such a company with a class of super-voting shares was withdrawn when CRA expressed its concern on this issue. In 2011-0429261R3, a "qualifying person" ruling under Art. XXIX-A(2)(c) was largely facilitated by the fact that the authorized share capital of the particular US corporation consisted only of a single class of publicly-traded voting common stock.
Q. 5(b)
Criteria for substantial business. In 2009-0349141R3, 2011-0424211R3 and 2012-0458361R3, where the issue was whether the size of the US business was substantial in relation to the Canadian operations under Art. XXIX-A(3), Rulings considered:
the relative amount of assets, revenues, income, compensation expenses, and the overall number of employees involved in the US business in comparison to those in respect of the Canadian activities.
Q. 5(b)
Dividends to bankrupt U.S. parent. Respecting dividends paid by a Canadian subsidiary corporation to its bankrupt US parent, Rulings confirmed the availability of Art. XXIX-A(3)
on the basis that the US person was viewed as being engaged in the active conduct of a trade or business in the US, despite the fact that business activities in the US had ceased as a result of the bankruptcy…while noting that the purpose of the dividend was to pay the US parent corporation's creditors… .
Q. 5(c)
Base erosion test in first year. In 2012-0471921R3, the ownership test in Art. XXIX-A(4)(a) was satisfied at the time that a dividend was proposed to be paid from a Canadian subsidiary to its U.S. parent. However, as the base erosion test under Art. XXIX-A(4)(b) was being applied in the first fiscal period of the US person, Rulings was unable to confirm whether the conditions of the base erosion test in paragraph (b) were satisfied throughout that fiscal period. Rulings confirmed the availability of Treaty benefits for the dividend, subject to the base erosion test being satisfied by the taxpayer for the current taxation year.