CRA confirms that repayment by a non-resident debtor of a s. 15(2) loan to a non-resident assignee of the Canadian creditor can generate a s. 226(6.1) refund to it

In 2013-0482991E5, CRA considered that where Canco seeks to avoid the application of s. 15(2) to a loan (the "Debt") owing to it by a non-resident sister company (Debtco) by assigning the Debt to their non-resident parent (Parentoco) in repayment of a loan owing by it to Parentoco, this assignment will not qualify as a repayment of the Debt (so that s. 214(3)(a) could then apply to impose Part XIII tax on the Debt amount).

In a follow-up, CRA confirmed that if Debtco subsequently repays the Debt to Parentco, it can obtain a refund under s. 227(6.1) of the Part XIII tax remitted by Canco, i.e., a payment from one non-resident to the other generates a refund of the Canadian tax.

Neal Armstrong. Summary of 24 April 2015 T.I. 2014-0560401E5 under s. 227(6.1).