Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether a mineral right situated outside Canada is a specified foreign property.
Position: Yes, a mineral right situated outside Canada is a specified foreign property pursuant to paragraph (a) of that defined term in subsection 233.3(1). Please note that this view replaces the views expressed in document 2014-052224, which opined that a mineral right was a specified foreign property pursuant to paragraph (b) of that defined term in subsection 233.3(1).
Reasons: A mineral right is generally considered an intangible property.
Author: Naufal, Bob
March 1, 2016
Jyoti Lal HEADQUARTERS
Compliance Programs Branch Income Tax Rulings Directorate
International and Large Business
Re: T1135 - Mineral rights situated outside of Canada
We are writing to clarify certain comments made in our letter dated October 5, 2015 [Document 2014-052224]. In that document we were asked whether the right to mine minerals in the US would be considered a “specified foreign property” as defined in subsection 233.3(1) of the Income Tax Act (the “Act”), and therefore reported on Form T1135, Foreign Income Verification Statement.
In document 2014-052224 we commented that a right to mine for minerals in a mineral resource outside Canada falls within subparagraph (b)(ii) of the definition of “foreign resource property” in subsection 248(1) of the Act. We further commented that for such mineral right to be considered specified foreign property, the right would have to be tangible property, which is understood to include real property such as land and rights issuing out of, annexed to and exercisable within or about land. Finally, we opined that a mineral right of a reporting entity would be considered a tangible property and therefore, a specified foreign property pursuant to paragraph (b) of that defined term in subsection 233.3(1) of the Act.
We wish to clarify that a specified foreign property can include inter alia tangible or intangible property. Furthermore, it is our general understanding that, real property can include both tangible property as well as intangible property. In addition, we wish to clarify that a mineral right would likely be considered an intangible property. Therefore, in our view, a property of a person or partnership that is a mineral right situated outside Canada would be considered a specified foreign property pursuant to paragraph (a) of that defined term in subsection 233.3(1) of the Act.
We trust our comments will be of assistance.
Administrative Law Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without the prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5.
© Her Majesty the Queen in Right of Canada, 2016
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2016
For additional commentary on Technical Interpretations, court cases, government releases, and conference materials in a single practical document specifically geared toward owner-managed businesses, see Video Tax News Monthly Tax Update newsletter.
This effective summary and flagging tool is the most efficient way to ensure that you, your firm, and clients are fully supported and armed for whatever challenges are thrown your way.
Packages start at $399/year.