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Vol. 133, No. 43 — October 23, 1999
Regulations Amending the Duty Free Shop Regulations
Statutory Authority
Customs Act
Sponsoring Department
Department of National Revenue
REGULATORY IMPACT ANALYSIS STATEMENT
Description
In the past, there has been some confusion on the part of duty free shop owners as to whether any or all of the shares of a corporation licensed to operate a border crossing duty free shop could be owned by a "second-level" corporation. These amendments will clarify the provisions of subsection 3(3) of the Duty Free Shop Regulations so that shares of a corporation licensed to operate a duty free shop at a border crossing point may be owned by another corporation whose shares are owned entirely by individual persons.
The individual shareholders of these "second-level" corporations are themselves obliged to meet the requirements pertaining to Canadian citizenship and residency, and also be persons of "good character". These requirements represent no change from the present rules for the individual shareholders.
Alternatives
Revenue Canada considered the following options in relation to the problem at hand:
(1) cancelling or suspending the licences in question;
(2) informing the duty free shop licensees to dissolve the "second-level" corporations who owned the shares in the duty free shops at border crossings, and to sell or transfer those shares to qualifying individuals; or
(3) amending the Regulations to allow "second-level" corporations to own the shares of corporate duty free shops at border crossings.
It was felt that the third option would be the preferred course of action, since it would cause the least disruption for the duty free shop owners.
Benefits and Costs
These amendments will involve no additional administrative or compliance costs for duty free shop operators or for Revenue Canada. The chief benefit of the amendments will be the provision of greater flexibility in the way corporate duty free shops at border crossings are organized.
Consultation
Revenue Canada carried out consultations with the licensees who have not been in compliance with the existing provisions and with representatives of the Frontier Duty Free Association. All of the parties consulted support these changes.
Compliance and Enforcement
Revenue Canada officials will monitor compliance with these amendments as part of the normal auditing and monitoring activities already used to ensure compliance with the Duty Free Shop Regulations. The Department and the corporate duty free shop operators will incur no new compliance costs as a result of these changes.
Contact
Mr. Raymond Bédard, Manager, Duty Free Shops, Operational Policy and Coordination Directorate, Customs and Trade Administration Branch, Revenue Canada, Connaught Building, 5th Floor, 555 Mackenzie Avenue, Ottawa, Ontario K1A 0L5, (613) 954-7217.
PROPOSED REGULATORY TEXT
Notice is hereby given that the Governor in Council, pursuant to paragraphs 30(a) and (b)(see footnote a) of the Customs Act(see footnote b), proposes to make the annexed Regulations Amending the Duty Free Shop Regulations.
Interested persons may make representations with respect to the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to the Minister of National Revenue, Connaught Building, 7th Floor, 555 Mackenzie Avenue, Ottawa, Ontario K1A 0L5.
The representations should stipulate those parts of the representations that should not be disclosed pursuant to the Access to Information Act in particular pursuant to sections 19 and 20 of that Act, the reason why those parts should not be disclosed and the period during which they should remain undisclosed. The representations should also stipulate those parts of the representations in respect of which there is no objection to disclosure pursuant to the Access to Information Act.
Ottawa, October 12, 1999
MARC O'SULLIVAN
Assistant Clerk of the Privy Council
REGULATIONS AMENDING THE DUTY FREE SHOP REGULATIONS
AMENDMENT
1. Subsection 3(3) of the Duty Free Shop Regulations(see footnote 1) is amended by striking out the word "and" at the end of paragraph (a) and by replacing paragraph (b) with the following:
(b) all the shares of the corporation are beneficially owned by
(ii) another corporation that is incorporated in Canada and is wholly owned and controlled, directly or indirectly, in any manner whatever, by Canadian citizens or permanent residents, or
(iii) both a Canadian citizen or a permanent resident referred to in subparagraph (i) and another corporation referred to in subparagraph (ii); and
(c) the Canadian citizens or permanent residents referred to in paragraph (b)
(ii) maintain their principal residence in Canada, and
(iii) resided in Canada for at least 183 days of the year before the year in which the corporation makes the application for the licence.
COMING INTO FORCE
2. These Regulations come into force on the day on which they are registered.
[43-1-o]
S.C. 1995, c. 41, s. 7
R.S., c. 1 (2nd Supp.)
SOR/86-1072
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