A deemed dividend may arise if the parent funds a CRIC by way of contributions of capital

In light of the foreign affiliate dumping rules, it often will be inadvisable for a non-resident parent to fund the investment of a Canadian holding company (a "CRIC") in foreign affiliates with a contribution of capital rather than with a share subscription.  Although s. 84(1)(c.3) will not prohibit subsequently converting the contributed surplus of the CRIC arising from this contribution into cross-border paid-up capital, this will not retroactively eliminate any cross-border deemed dividend otherwise arising at the investment time.  See Example 7-G.

Neal Armstrong.  Discussion of s. 84(1)(c.3) under s. 212.3(7) - Contributions of capital.