Effective April 1, 2011, the fishing licensing policy for the Atlantic Canada and Quebec inshore fishery will change to allow inshore fishing licenses to be issued to wholly owned corporations, the Minister of Fisheries and Oceans announced recently. This change is significant, as previously inshore fishing licenses were only issued in the name of individuals and the Canada Revenue Agency would not recognize a corporation as owning a fishing license. The new policy is intended to provide more flexibility and control to fishers to arrange their financial affairs.

 

The new policy allows qualified fishers to request an eligible license be re-issued to a wholly owned corporation. In order to qualify, the license must:

 

• Be an inshore fishing license; and

• The corporation must be a wholly-owned, private Canadian corporation for which all voting and non-voting shares are issued to the current license holder.

 

A request to re-issue the license to the corporation must:

 

• Be in writing;

• Include a copy of the Certificate of Incorporation of the company;

• Include certification by a lawyer or professional accountant verifying all voting and non-voting shares are issued to the current license holder; and

• Include a declaration by the 100% shareholder as an officer of the corporation stating that the company has not entered into a “controlling agreement” as defined by the Fisheries and Oceans Canada’s policy on Preserving the Independence of the Inshore Fleet in Canada’s Atlantic Fisheries (PIIFCAF). A “controlling agreement” is an agreement between a license holder and another person or entity that would control or influence the license holder’s decision to request a license transfer.

 

This development will be of particular interest to tax advisors. It has the potential to settle some of the remaining uncertainty that can arise when dealing with tax issues for corporate owned fishing licenses. Arguably much of the uncertainty was resolved with the Supreme Court of Canada decision in Saulnier (Receiver of) v. Royal Bank of Canada, 2008 SCC 58. The decision stated that a fishing license is property for certain purposes. Tax advisors therefore concluded that a fishing license is also property for the purposes of the Income Tax Act (Canada) and eligible to be transferred by the fisher to a corporation on a rollover basis. However, the new policy should relieve any latent issues regarding the tax treatment of fishing licenses for those fishers who conduct their business through a corporation.

 

The requirement that a company must be wholly owned in order to qualify seems unnecessarily restrictive. Notwithstanding, the new policy appears to permit fishers to enjoy certain tax and estate planning opportunities through corporate ownership previously denied by the Canada Revenue Agency on the basis of DFO policy.