Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Would the cash-settled derivative transaction described in technical opinion #2003-0008355 be subject to the proposed foreign investment entity rules?
Position: No, based on the amended legislative proposals of October 30, 2003.
Reasons: It is because the words in brackets "(other than money)" have been added after the word "property" to subparagraph (d)(ii) of the definition of "participating interest" in proposed subsection 94.1(1) of the Income Tax Act.
XXXXXXXXXX 2003-002343
S. Leung
November 7, 2003
Dear XXXXXXXXXX:
Re: Proposed Subsection 94.1(1) of the Income Tax Act (the "Act")
Definition of "Participating Interest"
We are writing in reply to your letter of June 11, 2003 concerning the interpretative position we held in our technical opinion #2003-0008355, dated April 24, 2003. You put forward certain technical and policy arguments in your letter against our interpretation on the proposed definition of "participating interest" in subsection 94.1(1) of the Act with respect to the cash-settled derivative transaction described in our above-noted technical opinion.
As you are aware, the Department of Finance released on October 30, 2003 draft legislation titled "Legislative Proposals for the Taxation of Non-Resident Trusts and Foreign Investment Entities" (the "Draft Proposal") in which the words in brackets "(other than money)" have been added after the word "property" to subparagraph (d)(ii) of the definition of "participating interest" in proposed subsection 94.1(1) of the Act. As a result of this amendment and based on definition of "participating interest" in the Draft Proposal, we are of the opinion that the cash-settled derivative transaction described in our technical opinion #2003-0008355 would not be subject to the proposed Foreign Investment Entity rules.
As stated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, the opinion expressed in this letter is not a ruling and is consequently not binding on the Canada Customs and Revenue Agency.
Yours truly,
Jim Wilson
Section Manager
for Division Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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