2015-0576511e5 FISHING VESSELS AND ATLANTIC INVESTMENT TAX CREDIT

Principal Issues: Whether a new fishing vessel can qualify for the AITC if it is primarily used in the prescribed offshore region?

Position: Yes.

Reasons: See below.

Author: Robinson, Katie
Section: 37(1.3), 127(9), 255, Regulation 4609, Interpretation Act - 2.1, 35(1), Oceans Act - 4, 5, 6, 13, 25

XXXXXXXXXX

2015-057651
K. Robinson

April 28, 2015

Dear XXXXXXXXXX:

Re: Fishing vessels and Atlantic Investment Tax Credit

We are writing in reply to your letter of March 5, 2015, wherein you requested our comments on whether fishing vessels used in the “prescribed offshore region”, as that term is defined in section 4609 of the Income Tax Regulations, can be “qualified property” as defined in subsection 127(9) of the Income Tax Act (“Act”) for the purposes of the Atlantic Investment Tax Credit (“AITC”).

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation. It does not confirm the income tax treatment of a particular situation but is intended to assist you in making that determination. The income tax treatment of transactions will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, “Advance Income Tax Rulings”.

In May 1991, the definition of “qualified property” in subsection 127(9) was amended to provide that for that definition “Canada” would include the offshore region prescribed for the purpose of the definition of “specified percentage” in subsection 127(9). This amendment is applicable for acquisitions after February 25, 1986.

The definition of “specified percentage” includes, inter alia, a qualified property acquired primarily for use in a “prescribed offshore region”. Section 4609 of the Income Tax Regulations defines the following region as “prescribed offshore region”:

a.  that submarine area, not within a province, adjacent to the coast of Canada and extending throughout the natural prolongation of that portion of the land territory of Canada comprising the Gaspé Peninsula and the provinces of Newfoundland, Prince Edward Island, Nova Scotia and New Brunswick to the outer edge of the continental margin or to a distance of two hundred nautical miles from the baselines from which the territorial sea of Canada is measured, whichever is the greater; and

b.  the waters above the submarine area referred to in (a).

Accordingly, new fishing vessels that otherwise meet all the requirements set out in the definition of qualified property are eligible for the AITC if such primary use (in Canada) includes the prescribed offshore region.

We trust that these comments will be of assistance.

Yours truly,

Michael Cooke, CPA, CA
Manager
Business Income and Capital Transaction Section
Business and Employment Division
Income Tax Rulings Directorate

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