CRA finds that a partnership can enjoy qualifying interests in its non-resident subsidiaries for FAPI purposes notwithstanding that s. 95(2)(y) deems its Canadian parent to (also) own those shares directly for s. 95(2)(a) purposes

Where Canco holds foreign affiliates (Forco1, and its subsidiary, Forco2) through a partnership, s. 95(2)(a)(ii)(B) can still operate to deem interest paid by Forco2 to Forco1 to be active business income and not FAPI to the partnership. The partnership (which is a separate person for FAPI computation purposes) itself has a qualifying interest in Forco1 and Forco2 – notwithstanding that s. 95(2)(y) deems Canco to hold the shares of Forco1 directly for purposes of determining whether Forco1 and Forco2 are foreign affiliates of Canco for s. 95(2)(a) purposes.

Neal Armstrong.  Summary of 12 July 2013 T.I. 2011-0415911E5 under s. 95(2)(m).