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 limited liability company organized in Madagascar is a corporation for purposes of the Act.
Position: Yes.
Reasons: An SARL has several characteristics of a corporation, including the separate legal entity.
XXXXXXXXXX 2004-006186
Fouad Daaboul
October 5, 2004
Dear XXXXXXXXXX:
Re: Status of a Malagasy "Société à responsabilité limitée" for Canadian tax purposes
This is in reply to your request of February 10, 2004, wherein you requested our views on whether a Société à responsabilité limitée organized under Malagasy law ("SARL") is to be treated as a corporation for purposes of the Income Tax Act (the " Act "). We also acknowledge the following submissions received with your request : (i) a copy of the Madagascar legislation enacting the SARL: "VI.2. Loi du 07 mars 1925 tendant à instituer des sociétés à responsabilité limitée"; (ii) a copy of a letter from the law firm XXXXXXXXXX summarizing the legal and tax characteristics of an SARL under Malagasy law; and (iii) a draft copy of the Articles of Association establishing an SARL.
The following is our understanding of the statutory provisions governing the SARL:
? An SARL is a private company limited by shares in respect of which there is no express or implied partnership between the shareholders.
? An SARL is brought into existence by statutes signed by the shareholders and registered at the local Chamber of Commerce. Its instrument of constitution stipulates, inter alia, the amount of its capital stock (capital social) that is divided into shares (parts sociales) having the same par value.
? An SARL is a legal person under the Malagasy commercial code.
? An SARL has the ability to enter into legally enforceable contracts and can be subject to legal action.
? An SARL is able to legally own a property in the same way that a person would: ie, the title certificate of a property is issued in the name of an SARL and liabilities arising from such a property are only against the SARL.
? An SARL appears to have a limited life. According to the recent reform of the Malagasy corporate law, the Law no2003-036 of January 30, 2004 and the Decree 20004-453 of June 14, 2004 (the " Reform "), such a limited life cannot exceed 99 years.
? An SARL is restricted from issuing securities to its own account.
? An SARL is taxed in Madagascar as a "corporation". It is required to file an annual tax return by April 30th of each year.
? There must be at least two shareholders of an SARL. With the Reform, an SARL may now have only one shareholder.
? A shareholder's liability in respect of an SARL is limited to the amount of the shareholder's contribution to the SARL.
? Shareholders of an SARL are not legally liable for debts owed by the SARL.
? The statutes evidence a shareholder's ownership in an SARL. The shareholder is free to deal with her/his shares subject to conditions provided for in the commercial code or in the statutes.
Given the above-mentioned facts dealing with an SARL organized under the Malagasy legislation and its shareholders, we are of the view that an SARL would be a corporation for purposes of the Act.
We trust our comments will be of assistance.
Yours truly,
Alain Godin
Section Manager
for Division Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Planning Branch
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