Income Tax Severed Letters - 2025-08-13

Conference

28 May 2025 IFA Roundtable Q. 1, 2025-1052641C6 - Digital Services Tax (DST) Act

Unedited CRA Tags
Digital Services Tax (DST) Act.
Summary Under
Tax Topics - Other Legislation/Constitution - Federal - Digital Services Tax Act - Section 45
various issues re CRA administration

Principal Issues: Updates on various CRA administrative procedures concerning the Digital Services Tax (DST) Act.

Position: See discussions below.

Reasons: See discussions below.

28 May 2025 IFA Roundtable Q. 2, 2025-1052681C6 - Global Minimum Tax Act

Unedited CRA Tags
Global Minimum Tax Act
Summary Under
Tax Topics - Other Legislation/Constitution - Federal - Global Minimum Tax Act - Section 60 - Subsection 60(1)
affected taxpayers are expected to start registering for GMTA purposes in late 2025

Principal Issues: Update on CRA's implementation activities in response to 2025 IFA Conference question.

Position: n/a.

Reasons: n/a.

28 May 2025 IFA Roundtable Q. 3, 2025-1055511C6 - Cash Pooling

Unedited CRA Tags
15(2)
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.17)
illustration of ordering rule for determining whether s. 15(2.17) applies to a cross-border notional cash pooling arrangement
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.6)
frequent anticipated payments and repayments occurring in a cross-border physical or notional cash-pooling arrangement likely would be a s. 15(2.6) series
Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.11)
PLOI election available re cross-border cash-pooling arrangement/ simplified PLOI election will be announced

Principal Issues: Update on cash pooling.

Position: See below.

28 May 2025 IFA Roundtable Q. 4, 2025-1052581C6 - Requests for documents under section 231.1

Unedited CRA Tags
Section 231.1
Summary Under
Tax Topics - Income Tax Act - Section 231.1 - Subsection 231.1(1)
CRA is now using s. 231.1 as its primary demand power, and is relegating s. 231.2 to special situations
Summary Under
Tax Topics - Income Tax Act - Section 231.2 - Subsection 231.2(1)
s. 231.1 is CRA's primary information-request power, and it uses s. 231.2 only in special situations, e.g., information about unnamed persons

Principal Issues: Whether CRA can provide guidance on its use of the phrase “all documents and records relating to advice…received, decisions made…” in respect of requests for documents under section 231.1.

Position: N/A.

Reasons: N/A.

28 May 2025 IFA Roundtable Q. 5, 2025-1063771C6 - Computation of FAT

Unedited CRA Tags
91(1), 91(4), 95(1)
Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Tax
formula for prorating foreign tax between a FAPI and non-FAPI business for FAT purposes

Principal Issues: Allocation of deductions allowed under foreign law between the active business and the FAPI-generating business of a foreign affiliate for the purpose of determining the amount of foreign tax that is FAT applicable to the FAPI of the foreign affiliate.

Position: Foreign deductions should first be allocated to income from an activity to which they may reasonably be regarded as applicable.

Reasons: The language in the FAT definition in subsection 95(1) requires an allocation of foreign tax to FAPI on reasonable basis.

28 May 2025 IFA Roundtable Q. 6, 2025-1052631C6 - Earnings of a disregarded US LLC

Unedited CRA Tags
Reg 5907(1) "earnings" "loss", Reg 5907(2.03)
Summary Under
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(2.03)
the opening UCC for used depreciable property of an acquired LLC for the first year of computing its (a)(iii) earnings was the lesser of UCC and FMV

Principal Issues: In the facts outlined, for purposes of determining US LLC’s 2024 earnings from its active business in accordance with regulation 5907(2.03), should the maximum CCA be considered to have been claimed by US LLC for the 2017 to 2023 taxation years?

Position: No.

Reasons: See below.