2015-0583821E5 212.3(7)(d) - Prescribed information

Principal Issues: The prescribed manner of the form containing prescribed information required in subparagraph 212.3(7)(d)(i).

Position: The filing requirements of subparagraph 212.3(7)(d)(i) would be met if a letter containing the relevant information is attached to the T2 filed by the taxpayer on or before the relevant filing-due date. Alternatively, if the taxpayer has filed their T2 electronically, the letter may be mailed on its own to the taxpayer’s Tax Centre on or before the relevant filing-due date.

Reasons: In the absence of specific guidance or procedures, a letter containing the relevant information would be a reasonable and fair manner of requiring prescribed information to be filed in the circumstances and this format has been acceptable in other similar circumstances.

Author: Chang, Jack Yu-Fan
Section: 212.3(7)(d), 227(6.2)

XXXXXXXXXX
                                                                                                                                                             2015-058382
                                                                                                                                                             Jack Chang

June 12, 2015

Dear XXXXXXXXXX,

Re:   Subparagraph 212.3(7)(d)(i) – Reduction of paragraph 212.3(2)(a) deemed dividend

We are writing in response to your query of April 22, 2015 in which you requested our views on the format acceptable as the prescribed manner of filing a form containing prescribed information as described in subparagraph 212.3(7)(d)(i) of the Income Tax Act (the “Act”). 

It is our view that, in the absence of specific guidance on current procedures for the acceptance of the prescribed information, it would be acceptable that the relevant information be provided in the format of a letter.  As such, the filing requirements of subparagraph 212.3(7)(d)(i) would, in our view, be met to the extent that the aforementioned letter is filed by the CRIC (as referred to in subsection 212.3(1)) with its T2 return or, where the CRIC files its T2 electronically, filed by the CRIC separately (i.e., mailed to its Tax Centre), on or before the relevant filing-due date established in subparagraph 212.3(7)(d)(ii).

In addition to the amounts of paid-up capital required by subparagraph 212.3(7)(d)(i) to be provided, identified as items (i) through (iii) below, the letter should, in our view, also contain the information outlined below in items (iv) and (v):

(i)   the amounts of the paid-up capital, determined immediately after the dividend time and without reference to subsection 212.3(7), of each class of shares that is described in paragraph 212.3(7)(a) or that is a cross-border class in respect of the investment;

(ii)  the paid-up capital of the shares of each of those classes in item (i) that are owned by the parent or another non-resident corporation that does not, at the dividend time, deal at arm's length with the parent;
(iii) the reduction under any of subparagraphs 212.3(7)(a)(ii), (b)(ii) and (c)(ii) in respect of each of those classes in item (i);

(iv)  details of the investment made by the CRIC including:

a.    the investment time (as referred to in subsection 212.3(1)),
b.    a description of the type of investment under subsection 212.3(10), and
c.    the fair market value of the investment; and

(v)   details of the deemed dividend determined under paragraph 212.3(2)(a) including:

a.    the dividend time (as defined in subsection 212.3(4)), and
b.    the quantum of the deemed dividend.

We would note that, to the extent the filing requirements of subparagraph 212.3(7)(d)(i) have not been met by the relevant filing-due date established in subparagraph 212.3(7)(d)(ii), subsection 227(6.2) would allow a CRIC to request a refund of the withholding taxes paid in respect of the deemed dividend under subparagraph 212.3(7)(d)(ii) by way of a written application made no more than two years after the filing requirements of subparagraph 212.3(7)(d)(i) are met.

We hope these comments have been of assistance.

Yours truly,

Lori M. Carruthers CPA, CA
Section Manager
for Director
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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