Income Tax Severed Letters - 2026-04-15

Ruling

2024 Ruling 2023-0976381R3 - Ruling Request - Foreign Tax Credit

Unedited CRA Tags
Subsections 126(1), 126(7) “non-business-income tax”, Article 13(5) and Article 21(1) & (4) of the Canada-China Tax Treaty
Summary Under
Tax Topics - Income Tax Act - Section 126 - Subsection 126(1) - Paragraph 126(1)(b)
a taxable capital gain from closing on a sale of Chinese private company shares in China was “qualifying income” sourced from China
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 3
a taxable capital gain from closing on a sale of Chinese private company shares in China “arose” in China

Principal Issues: (1) Whether the gain realized by the Taxpayer on the sale of his shares in certain Chinese Private Companies will be “sourced” in China for the purposes of paragraph 126(1)(b) and the determination of “qualifying income” in subsections 126(7) and (9) of the Act; and (2) be considered to “arise” in China for the purposes of Articles 13(5) and 21(4) of the Canada-China Income Tax Treaty.

Position: (1) The taxable capital gain will be “sourced” in China under paragraph 126(1)(b) and the determination of “qualifying income” in subsections 126(7) and (9) of the Act; (2) if the gain arises in China under Chinese income tax laws, the gain will be considered to have arisen in China under Articles 13(5) and 21(4) of the Canada-China Income Tax Treaty.

Reasons: (1) Based on the facts and additional information provided; (2) for the purposes of Article 13(5) of the Canada-China Income Tax Treaty, the word “arise” has the meaning that it has under Chinese income tax laws pursuant to Article 3(2) of the Canada-China Income Tax Treaty.

2024 Ruling 2023-0984461R3 - Application of Article IV(7)(b)

Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 4
PUC increase and distribution from a Canadian qualified REIT subsidiary of a US REIT so as to skirt Art. IV(7)(b) of the Canada-US Treaty

Principal Issues: Various rulings relating to the withholding tax rate applicable to a deemed dividend from a Canadian resident qualified REIT subsidiary to a US resident REIT.

Position: See below.

Reasons: See below.

Technical Interpretation - External

19 November 2025 External T.I. 2025-1082241E5 - Logging Tax Credit

Unedited CRA Tags
ITA: 127(1), 127(2) “income for the year from logging operations in the province”; “logging tax”; 127(3); 127(5); 127(9); Reg: 700(1); 700(2); 700(3); Logging Tax Act (BC): 1 “income derived from logging operations” “logging operations
Summary Under
Tax Topics - Income Tax Regulations - Regulation 700 - Subsection 700(1)
a company that hauled (but did not cut) timber did not general a logging tax credit

Principal Issues: Whether a company that is solely engaged in the hauling of cut timber is eligible for a logging tax credit under subsection 127(1) of the Income Tax Act.

Position: No.

Reasons: The law.

2 December 2024 External T.I. 2023-0973581E5 - Registered Disability Savings Plan

Unedited CRA Tags
146.4(1) “disability assistance payment,”, “lifetime disability assistance payments”; 146.4(4);

Principal Issues: 1. Whether the LDAP formula in paragraph 146.4(4)(l) allows for an RDSP’s property to be fully distributed before a beneficiary of the RDSP attains the age of 83 years? 2. Whether DAPs under subparagraph 146.4(4)(n)(ii) can be made where the terms of an RDSP stipulate that only LDAPs are permitted? 3. Whether an RDSP can be voluntarily terminated during the lifetime of the beneficiary where the requirements of subparagraph 146.4(4)(p)(ii) are not met?

Position: 1. No; 2. Yes; 3. Yes, under certain circumstances.

Reasons: 1. Generally, the consequence of the formula in 146.4(4)(l) is that the there is an annual maximum limit of the amount of LDAPs that can be made in any given year, ensuring that the property of the plan is not depleted during the beneficiary’s lifetime. 2. A DAP is defined as any payment from an RDSP and as such under subparagraph 146.4(4)(n)(ii) a DAP that is an LDAP or not an LDAP can be made, the latter payment requires that the terms of the RDSP allow for such a payment. 3. Paragraph 146.4(4)(p) does not provide the conditions under which an RDSP can be voluntarily terminated, rather it provides that if certain conditions are met the RDSP must be terminated. A voluntarily termination of an RDSP may be possible but could be delayed depending on whether the restrictions on distributions of the RDSP’s property apply.