CRA rules that an investment in MRPS was a share investment potentially triggering the CRIC rules

The Luxembourg tax authorities consider mandatorily redeemable preferred shares (i.e., shares which must be redeemed before the 10th anniversary of their issuance) of a Luxembourg s.à r.l. to be debt for Luxembourg purposes, so that dividends paid on the shares are treated as deductible interest.  CRA has ruled that MRPS will be treated as shares, although the MRPS in question were non-dividend bearing (perhaps because dividend-bearing MRPS would engage the foreign tax credit generator rules (see draft s. 91(4.7) or because of term preferred share issues  - there also was a s. 258(3) ruling).

The MRPS were issued to a Canadian public company which was partly owned, and controlled, by a non-resident public company, with the proceeds used to fund an off-shore project (perhaps a mine).  CRA indicated that the foreign affiliate dumping rules would apply to the investment if the Canadian public company could not satisfy the onerous requirements of s. 212.3(16) (so that the paid-up capital of the Canadian public company's shares would be reduced by the amount of the investment, or it would be deemed to pay a dividend to its parent).

Neal Armstrong.  Summaries of 2012 Ruling 2012-0452291R3 under ss. 212.3(2) and 248(1) - share.