Principal Issues: Dividende réputé selon 84.1 dans une structure composée d'employés et d'Achat Ltée
Position: Nous sommes d'avis que de façon générale, les employés et Achat Ltée auront entre eux un lien de dépendance.
Reasons: Positions précédentes et jurisprudence.
2012 Canadian Tax Foundation Annual Conference CRA Panel
November 2012
Recent files of interest
Rulings on "Buyco" corporations for employees
In the late 1990s and early 2000s, we issued advance income tax rulings for transactions allowing employees / shareholders of private corporations, who are about to leave, to realize a capital gain on the disposition of their shares, instead of a deemed dividend.
In this type of transaction, employees of a corporation (Opco) received shares of the capital stock of Opco as an employee share plan benefit (ESP). Under the terms of the ESP, employees were required to dispose of these shares upon retirement or other termination of employment.
In order to facilitate the disposition, Opco would form a new company (Purchase Ltd.) and inject funds into it. Purchase Ltd. would use these funds to purchase the Opco shares held by the resigning employee.
In the advance rulings we issued for this type of transaction, we gave assurances that the resigning employees would not be deemed to have received a dividend available to their Opco shares pursuant to section 84.1. However, this assurance was based on representations that the employees and Purchase Ltd. were dealing at arm's length with each other and that Purchase Ltd. was not an agent of Opco.
Given the nature of the arrangements offered to resigning employees by Purchase Ltd. and the absence of separate stakeholder interests, the logic is that employees and Purhase Ltd. are generally not dealing at arm's length. This position is consistent with the position taken in several published documents (2007-0243171C6, 2002-0166655 and 2004-0103061E5) and the jurisprudence (Petro-Canada v. The Queen (97-3567 (IT) G (confirmed by the Federal Court of Appeal (2004 FCA 158)) and RMM Canadian Enterprises Inc. et al v. The Queen (97 DTC 302). As a result, for advance rulings made in 2012, we refused to confirm that resigning employees would not be deemed, under section 84.1, to have received a dividend from Purchase Ltd. on the disposition of the Opco shares.
Katie Campbell
2013-047940