(d) In addition to any other penalty provided in this or in any other Act, any false statement made in any form prescribed or in any information required hereunder shall disentitle the taxpayer to any deductions or benefits of this section.

MINING CORPORATIONS

For the purpose of encouraging the development of the mining industry, section 89 (1936 amendment) provided that the income of a company derived from the operation of any metalliferous mine which comes into production after May 1, 1936, and prior to January 1, 1940, shall be exempt from the corporation tax for its first three fiscal periods following the commencement of production. An amendment of June 3, 1939 (chapter 46), extends this exemption to metalliferous mines coming into production prior to January 1, 1943.

According to regulations issued by the Department of National Revenue (Canada Gazette, June 24, 1939), a mine shall be deemed to have come into production of ore in reasonable commercial quantities 6 months after the date when the company starts the shipment of ore or when milling operatings actually start with a commercial milling unit. This 6-month period is allowed as a period for the purpose of tuning up, adjustments, and absorption. At the end of the 6-month adjustment period the company is required to close its books for the purpose of commencing a new fiscal period. If the day following the end of the 6-month period falls on a date after May 1, 1936, and prior to January 1, 1943, then the company is exempt for a period of 36 months from such date. The manager, president, or secretary of the company is required to certify when the company started the shipment of ore or when milling operations actually started with a commercial milling unit.

Commencing with the start of the 6-month adjustment period, all expenses incurred prior thereto in the development of the mine (buildings, machinery, and cost of acquiring property excepted) are allowed as a deduction and are to be written off on the basis of 15 percent of such expenditures per annum. Costs of shafts which are sunk after the commencement of milling operations, or ore shipments, are to be written off at the rate of 15 percent of such cost per annum. It is provided that other development expenses incurred on the property during the period of tax exemption shall be charged to operating costs during the said period of tax exemption; provided, however, that where the Department of National Revenue is satisfied that the amount of development done is greater than that which would be normally required, a portion of such ddvelopment expenses may be capitalized and written off, on a basis agreed upon by the Department of National Revenue and the company. The rate of depreciation established by the company and concurred in by the Department of National Revenue in respect of depreciable assets during the period of tax exemption shall continue to be the basis of depreciation after the said period. Separate accounting records must be maintained in respect of any mining property for which exemption is sought.

FILM REMITTANCES TO NONRESIDENTS

The 1935 Amendment Act provided that copyright and film royalties paid to nonresidents were subject to a 5 percent withholding tax (see page 77), but a 1936 amendment added a proviso that in the

case of motion-picture films 60 percent of such payment should not be subject to the tax so that the net tax on the gross amount was 2 percent. However, the Amendment Act of June 3, 1939, deleted the proviso effective as of April 26, 1939, so that film remittances to nonresidents since that date are liable to a 5 percent tax on the

gross amount.

Paragraph (e) of subsection 2 of section 98, which provides for the imposition of the 5 percent tax on copyright and film royalties payable to nonresidents, is further amended by the addition of the following: "No tax shall be payable by virtue of this paragraph in respect of any portion of any payment disallowed to the Canadian debtor under section 238 of this Act." The new section 238 provides: "Where any person carrying on business in Canada pays to a nonresident as price, rental, royalty or other payment for the use of any property or reproduction thereof, or for any right, an amount which is not in conformity with similar payments made by the other persons in the same kind of business, then such payment may, for the purposes of determining the income of such person, be adjusted by the Minister accordingly, unless he is satisfied that the payor and the recipient are not associated, controlled one by the other, or controlled by the same interests." (Chapter 43 of June 3, 1939).

MISCELLANEOUS AMENDMENTS

Other modifications effected by the Amendment Act of June 3, 1939, include the following:

A substituted subsection 2 of section 8 (foreign tax credit provisions page 87) provides: "Such deduction shall not exceed the same proportion of the tax otherwise payable under the Act as that which the taxpayer's not income from Sources within such country bears to his entire net income from all sources, without taking into account the exemptions provided by paragraphs (c), (d), (e), and (i) of subsection 1 and by subsections 2, 3, and 4 of section 5 of this Act." The preceding references are to the personal exemptions granted a married person, a single person, for dependent children and relatives and for investment income surtax purposes (page 83).

Added to the deductions from income not allowed, under the provisions of section 6, is paragraph (m): "The salary, bonus, director's fee or other like remuneration in excess of fourteen thousand dollars paid by a company incorporated in Canada to a nonresident, unless such nonresident pays tax thereon under this Act."

ONTARIO CORPORATION TAX

The Corporation Tax Act of the Province of Ontario, dated April 14, 1939, reenacts most of the provisions of the former Act (page 105 et seq.). Among the important changes, according to a report from the American Consulate, Toronto, are an increase in the levy on the net revenue of corporations from 1 to 2 percent, a reduction in the tax on paid-up corporate capitalization from one-tenth of 1 percent to one-twentieth of 1 percent, and the abolition of the special rates of taxation heretofore applied to gas and electric, and loan and trust companies. The special provisions for the taxation of insurance companies, banks, telephone, telegraph, express, and car companies, and race tracks remain unchanged.

QUEBEC CORPORATION TAX

The Quebec Corporation Tax Act of May 5, 1939, repeals and replaces all former legislation on this subject (page 109 et seq.). For ordinary companies the rate of one-tenth of 1 percent on the paid-up capital is maintained, plus an additional tax of $50 for each place of business in Montreal and Quebec and $25 for each place in any other municipality, according to a report from the American Consulate, Montreal.

However, when the amount of paid-up capital is less than $25,000, the tax on each place of business is $25 in the cities of Montreal and Quebec and $20 in other municipalities. The places of business for which this additional tax is to be imposed are: The company's head office, other office, stores, factories, workshops, agencies, stations, etc. A special scale of taxes is levied against certain types of companies such as banking, insurance, loan, navigation, telegraph, telephone, express, tramway, trust, gas and electric, gasoline, real estate, liquor, brewery, and tobacco.

TAX ON PROFITS

All ordinary and the special companies listed, with exception of a few such as banks, insurance, tramway, railway, and trust companies, must pay, in addition to the taxes on capital and places of business, an annual tax of 2.5 percent on net revenue, section 6, which imposes this tax reads as follows: "In addition to the taxes on capital and upon places of business mentioned in this Act, every company, partnership or person having its head office or an office in the Province or which is carrying on business therein, directly or through a person paid by salary, commission or otherwise, acting as employee, vendor, agent, representative, or in any other capacity, shall pay an annual tax of 2 per centum calculated on its total net revenue for the calendar year immediately preceding the date when the present tax is exigible."

.....

Of interest to American firms is section 30 which provides that: "Sales made by a company to purchasers residing in Quebec shall be considered as having been made in this Province, if the company has an office in Quebec or does business therein through a person residing in Quebec, acting as an employee, vendor, agent, representative or in any other capacity." Under this provision, all foreign firms selling through agents and representatives residing in and doing business in the Province of Quebec are subject to the payment of the taxes on corporations, the only exception being extra-provincial firms selling by mail order or selling through commercial travelers who have no domicile in the Province.

It is understood that the formula for taxing foreign companies used under the former Act is to remain unchanged in principle, and is approximately as follows: In calculating the capital tax on extraprovincial companies, the paid-up capital employee in the Province of Quebec is determined by the ratio of sales in the Province in comparison to the company's total sales. Thus, if an extra-provincial company has a total paid-up capital of $10,000,000 and total sales of $50,000,000 and sells in Quebec $2,000,000 worth of merchandise, the provincial tax would be 2/50 of 1/10 of 1 percent of the total paid-up capital. The place of business tax for Montreal and Quebec City, under the new Act, is $50 per annum, or $25 if the office of the 188896 0-39- -3

foreign firm or its representative is situated in any other Quebec municipality. For the tax on profits, no attempt is made to ascertain whether the profits were made in or without the Province. The entire business of the company is considered and the profits tax is calculated on the basis of ratio of sales. Thus, if the sales in Quebec of an extra-provincial firm totaled 2/50 of all the firm's sales, the Province collects 2/50 of the firm's profits at the rate 2.5 percent. As there are many small extra-provincial companies with low sales in the Province, the Provincial Revenue Office may recommend to the Provincial cabinet that a small tax of from $15 to $40, depending on the size of the company and its sales in the Province, be assessed to cover all three taxes (capital, place of business, and profits taxes).

LIBRARY

DIVISION OF COMMERCIAL LAWS

BOOKS RECEIVED.

Books: Kansas Reports, #148, by Else, 1938.

Reviews and Journals: Cuba Economica y Financiera, July 1939 and August 1939; American Bar Association Journal, August 1939; Current Legal Thought, July-August, 1939; La Semaine Juridque, August 1939; Commercial Law Journal, August and September 1939; Journal of Comparative Legislation and International Law, August 1939; Brazilian Business, August 1939; Seguros Publicacion Mensual, August 1939; American Import and Export Bulletin, September 1939; Revista del Tribunal Fiscal de la Federacion, (Mexico) 1938; The Australian Official Journal of Patents Trademarks and Designs, August 1939; Prevision Social May-June, 1939; Revista De Derecho, March-April May-June July-August, 1939; Journal of American Judicature Society, August 1939; Annual Report of the Chief Inspector of Factories, 1938; Union Panamaericana, October 1939; PetroleosLegislacion y Jurisprudencia, (Colombia) 1939; International Labour Office (Brochure Edition) July 1939; Feuille Federale, August 1939; Export Trade and Shipper, September 1939; La Propriete Industrielle, August 1939; The Corporation Journal, October 1939; The Australian Official Journal of Patents, Trade Marks, and Designs, August 1939 (2 copies); Monthly Labor Review, September 1939; The Carnegie Foundation for the Advancement of Teaching, Bulletin #13, 1939.

The existing system of old-age pensions was initiated by a law of February 11, 1919, providing that any person reaching the age of 60, or any age if absolutely incapacitated, who is completely indigent, has a right to receive from the State a minimum pension of 96 bes os per annum, or its equivalent in direct or indirect assistance. Foreigners with 15 years residence in the Republic are entitled to receive this pension on the same conditions as natives, but not if they have arrived in Uruguay incapacitated subsequent to February 11, 1919.

CONTRIBUTIONS

Revenues for the old-age pension under the original law were raised by a contribution by employers of 20 centesimos a month for every wage earner employed, surtaxes on real-estate property valued at over 200,000 pesos, and taxes on playing cards, wines, and liquors. The law of August 13, 1925, substituted a tax on urban employers of 20 centesimos per month per worker employed; a tax on rural establishments of 70 to 300 hectares, 2.40 pesos per month; on those of 300 to 1,000 hectares 4.80 pesos; on those over 1,000 hectares 2.40 pesos per additional 500 hectares; surtaxes on urban real estate beginning with .60 per mil on properties valued at 50,000 pesos and over; a tax on renters in Montevideo of 20 centesimos per month per each 50 pesos of rent (rentals of less than 50 pesos per month exempt); taxes on wines, liquors, and alcohol; 5 percent customs surcharge on imported automobiles.

The benefits, as stated above, are a minimum pension of 96 besos per annum. The usual pension is 120 pesos per annum paid monthly.

ADMINISTRATION

Prior to 1933 the various social insurance systems, including that of indigent old age and incapacity, were administered separately, by honorary boards of directors, but the decree law of December 3, 1933, placed them all under the Instituto de Jubilaciones y Pensiones del Uruguay, governed by an Honorary Directorate of a President and six other members, named by the Government, with a term of 4 years.

RETIREMENT SYSTEM

A system of retirement for Uruguayan government employees (Caja de Jubilaciones y Pensiones Civiles) was inaugurated 100 years ago (May 5, 1838), and progressively liberalized; but the general workmen's retirement system began in 1919 (law of October 6) creating the Caja de Jubilaciones y Pensiones de Empleados y Obreros de Servicios Publicos (Employees and Workers of Public Services Retirement and Pensions Fund), the field of which was limited to the staff and workers of the railways, telegraphs, telephones, tramways, waterworks, and gas-works. Laws of October 16 and November 20, 1922, and September 6 and October 28, 1926, extended the field to employees and workers of mutual medical assistance associations, workers in dykes, docks, shipyards, privately owned electric plants, and pilots.