CRA rules that the s. 115.2 safe harbour can apply to illiquid loans acquired on original issue

In specified circumstances s. 115(2)(c) deems non-resident "members" of a partnership not to be carrying on business in Canada by virtue only of investment management and administration services provided by a Canadian manager in respect of partnership investments, including "purchasing and selling qualified investments" such as indebtedness. CRA has ruled that this safe harbour applies where what is being purchased by the partnership is original issue illiquid debt, including of private companies. This is consistent with 2007-0224751R3.

Here there was a two-tier partnership structure where the management services were provided both to the "master" (i.e., bottom) partnership and to upper-tier "feeder" limited partnerships – so that the favourable ruling appears to implicitly accept that non-resident limited partners in the feeder partnerships are members of the master partnership.

Neal Armstrong. Summary of 2014 Ruling 2013-0513431R3 under s. 115.2(1) – designated investment services.