CRA indicates that share redemptions can qualify as PUC distributions under the PUC reinstatement rule in the foreign affiliate dumping rules

CRA has indicated that a share redemption by a CRIC (or qualifying substitute corporation) will be considered to be a distribution or reduction of paid-up capital by the CRIC for purposes of the PUC reinstatement rule in s. 212.3(9)(c).  However, it often will be preferable for the CRIC to effect a distribution of the subject shares or proceeds, rather than using such property to redeem its shares, given that only part of a PUC increase under s. 212.3(9) may reduce the deemed dividend arising on a share redemption.  See Example 9-A.

Neal Armstrong.  Summary of 23 May 2013 IFA Round Table, Q. 6(b) under s. 212.3(9).