2015-0581151I7 Dutch Co-Op Entity Classification

Principal Issues: Whether a particular Dutch cooperative would be treated as a corporation for the purposes of the Act?

Position: Yes.

Reasons: The provisions of the foreign legislation and the articles creating the Dutch cooperative support the conclusion that this entity should be treated as a corporation for the purposes of the Act.

Author: Basso, Denise
Section: 248(1) "corporation"

                                                                                                                           June 21, 2016

XXXXXXXXXX                                                                                                  Income Tax Rulings Directorate
XXXXXXXXXX TSO                                                                       International Division
                                                                                                                           Denise Basso
                                                                                                                           (416) 908-0032

                                                                                                                           2015-058115

Entity Classification of XXXXXXXXXX (“Dutch Co-Op”,) 
XXXXXXXXXX

Dear XXXXXXXXXX,

We are writing to you in response to your request for an entity classification determination in respect of the Dutch Co-Op, which we received on April 14, 2015. We understand that you are auditing a taxpayer that holds an interest in the Dutch Co-Op.  You have asked us to perform this entity classification in order to determine whether the Dutch Co-Op is a corporation or a partnership for purposes of the Income Tax Act (the “Act”) so that you are able to determine the Canadian tax implications of the investment in the Dutch Co-Op to the taxpayer.

There is little statutory guidance on how to characterize a foreign business association for Canadian tax purposes.  It is CRA's view that the appropriate approach to classifying an entity for Canadian income tax purposes is to first determine the characteristics of the foreign business association based on the relevant foreign commercial law and entity’s organizational documents, and then compare these characteristics with those of recognized categories of business association under Canadian commercial law in order to classify the foreign business association under one of those categories.  This two-step approach is consistent with the approach adopted by the Canadian courts.

In analyzing the Dutch Co-Op’s characteristics, we considered the Dutch Co-Op’s XXXXXXXXXX (the “Deed”), the Dutch Co-Op’s XXXXXXXXXX (the “Annual Report”), the XXXXXXXXXX (the "Dutch Legislation"), as well as our previous Dutch Co-op entity classification rulings.

Based on our analysis of the Deed, the Annual Report and the Dutch Legislation, provided that the Dutch Co-op complies with the Dutch Legislation, it is our view that the Dutch Co-op is a corporation for purposes of the Act.

I trust that this letter is satisfactory for your purposes. If you have any questions or require any additional information regarding the matters described in this letter, please do not hesitate to contact Denise Basso at (416) 973-0032, or me at (416) 954-8531.

Yours truly,

Julia Belova
Manager
for Division Director 
International Division 
Income Tax Rulings Directorate 
Legislative Policy and Regulatory Affairs Branch

cc:          XXXXXXXXXX
               XXXXXXXXXXTax Services Office
 

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