Regulation 37/09
Subsection 8(1)
Administrative Policy
10 November 2014 T.I. 2013-0513271E5 - Ontario CMT mark-to-market accounting adjustments
Is an accounting write-down of a owing by a corporation's foreign subsidiary not required to be added back to adjusted net income ("ANI") for Ontario Corporate Minimum Tax (CMT) purposes. CRA responded:
ANI for CMT purposes is to be computed to remove mark-to-market changes in the fair value of property held by the corporation that are reflected in a corporation's net income/net loss for the taxation year determined in accordance with GAAP. Therefore, where an unrealized loss on a debt is reflected in net income/net loss under GAAP as a mark-to-market change, it is included in ANI for CMT purposes as an accounting loss difference. In effect, the unrealized loss is added back to the financial statement net income/net loss in the determination of ANI.
Subsection 34(1)
Administrative Policy
16 June 2014 Memorandum 2014-0525961I7 - ON Tax and Brazilian Tax Sparing
Was tax deemed to have been paid (a "tax spared amounts") under Art. 22, para. 3 of the Canada-Brazil Treaty eligible for a foreign tax credit (an "ON FTC") under s. 34(1) of the Taxation Act, 2007 (Ontario) ("the TA")? The Directorate noted that as the tax spared amounts are not deemed to have been paid to Brazil by the Treaty for purposes of s. 126, they cannot be claimed thereunder, and that as Art. 22, para. 2 applies independently of s. 126, a taxpayer can claim a federal FTC in respect of tax spared amounts under that paragraph of the Tax Treaty, stating:
As section 126 of the Act does not apply to such a Federal FTC claim, none of the provisions of section 126 of the Act, including subsections 126(4.1) and (4.2) can be applied to deny such a Federal FTC claim.
Turning to the ON FTC, Art. 22, paras. 2 and 3 are not "federal application rules" for the purposes of granting ON FTCs under section 34(1) of the TA as they operate independently of s. 126. Accordingly:
any amount claimed as an ON FTC under subsection 34(1) of the TA must be for an amount paid to the government of a country other than Canada, as required by section 126 of the Act as read without reference to the Tax Treaty. Therefore tax spared amounts are not eligible for an ON FTC… .
Subparagraph 46(2)(h)(v)
Administrative Policy
19 August 2013 Memorandum 2013-0474031I7 - Ontario Transitional Tax Debit/Credit
A requested increase by a taxpayer whose control had been acquired to the federal CCA and CEC claimed and an increase to the federal non-capital losses was not considered to be tainting transactions as "requested adjustments to the federal pool balances puts the taxpayer in a similar position to what it would have been had the non-capital losses not been removed from the total federal and total Ontario pool balances."
The taxpayer also requested a decrease in Ontario CCA claims and an offsetting reduction to the Ontario non-capital losses, thereby creating a much larger transitional tax credit balance as the Ontario UCC/CECA balances were increased. The offsetting reduction in the Ontario non-capital losses had no effect on the pool balance difference because the non-capital losses were excluded from the total Ontario balance. These were tainting transactions (i.e., "events"), so that s. 46(2)(h)(v) shortened the amortization period.
Paragraph 54(2)(b)
Administrative Policy
Inter-Leasing, Inc. v. Ontario (Revenue), 2014 ONCA 575
In connection with a plan to minimize Alberta corporate tax, the Precision group of companies reorganized to implement a structure which, among other features, resulted in interest-bearing debts being owed to the taxpayer by a Yukon company in the form of deeds of specialty debt, which were physically transferred to the British Virgin Islands. This was done to avoid Ontario corporate minimum tax which, under the Corporations Tax Act s. 47(2)(b)(ii) (essentially the same in this regard as s. 54(2)((b)(ii) of the Taxation Act (Ontario)), applied only to "property situated in Canada."
After referring (at para. 74) to the distinction in Commissioner of Stamps v. Hope, [1891] AC 476 (PC) between a mere "debt by contract" which was situate based on "the personal residence of the debtor," and a "debt by specialty," which was "within the jurisdiction within which the specialty was found at the time of death," Pardu JA rejected an argument of the Ministry that "the common law situs principle governing specialty debts should not apply in the context of modern corporate taxation" (para. 75) and that the "connecting factors" test in Williams instead should be applied (paras. 81-3), stating (at para. 86):
Clear rules to determine the situs of specialty debts promote certainty in their application. A case by case analysis of connecting factors in each case would have the reverse effect.
Subsection 92(5.6)
Administrative Policy
3 February 2015 T.I. 2014-0531601E5 - OPSTC - "tangible property that is leased"
In finding that a "lease cost" did not include amounts payable under a licence of property (i.e., exclusive possession of the property was not given), CRA cited Will-Kare for the proposition that "the concepts of a sale or a lease have settled legal definitions."