CRA rules that Canadian Finco loans qualify as ordinary-course loans of a money-lending business

A grandchild Canadian subsidiary of a non-resident multinational will issue commercial paper and notes in the Canadian public markets and on-lend at a positive spread to non-resident affiliates which are not its foreign affiliates.  CRA ruled that this "Canco" will qualify for the exception in s. 15(2.3) from the shareholder loan benefit rule, on the basis that these loans will be made in the ordinary course of Canco's (intra-group) money-lending business.

This is a better result than avoiding the shareholder loan rules by electing under the draft October 15, 2012 draft rules to have the inter-company loans be "pertinent loans or indebtedness."  The required interest accrual on "PLOIs" is quite high (currently 5%) whereas the ruling refers to the interest rates charged by Canco being no less than the "ordinary" prescribed interest rate of 1%, which is not likely to be a constraint.

Neal Armstrong.  Summaries of 2012 Ruling 2011-0417711R3 under s. 15(2.3) and s. 17(5) - Exempt loan or transfer.