FROM: Marc G. Nencioni TO: Mr. R. Ackman
Taxation department
November 1, 1991
B.A.T. Group Fundamenr-I Re--ch
Attached are recent views from RCT on subs. 37(2)
(R. & D. outside Canada). I believe two
elements of importance are stated herein, Le.:
1) Results of R. & D. must have a direct &
beneficial application to 1711.
2) Some direction or control, coupled with the
acquisidon of cermin rielits to the
research must k obtained.
Also, I recently had an informal discussion with
the auditor in charge of the previous audit
and learned that they considered, at one point, to
take a closer look at our R. & D.
agreement. Their concerns were basically along
what is outlined above, with the intent to
determine whether payments to B.A.T. could be
construed as disguised royaldes; and
applicable to non-resident tax.
Another concern raised relates to the activities
performed by B.A.T. and their qualification to
reg. 2900 (copy attached). Finally, the method of
allocation could also be scrutinized and
any material change to the formula to increase our
share could be an incendve to RCT.
If you have any questions regarding this matter,
please contact me.
W EA)
MGN/jb
attachment
c1 c. M. Courtney
E. Darche
M. Tombari
C)
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BAT Industries document for Province of British
Columbia `12 November 1999