CRA (sort of) extends the deadline for making a disproportionate UFT claim by one year

Where a "grandchild" foreign affiliate (FA2) pays a dividend out of taxable surplus to a "child" foreign affiliate (FA1) of Canco, a pro rata portion of the underlying foreign tax of FA2 in respect of Canco is levitated and becomes UFT of FA1.  In addition, Canco can make a claim in a letter attached to its return to attach all (or any portion) of the remaining UFT of FA2 to the dividend.  This permits Canco to defer tax on any subsequent dividend received by it from FA1 out of taxable surplus.

In 901185, CRA indicated that this disproportionate UFT claim "can" be made by Canco in its return for the year (Year 1) in which the dividend was received by FA1.  CRA has now clarified that this disproportionate UFT claim can also be made by Canco in the immediately following year (Year 2) in which FA1 pays a dividend out of taxable surplus to Canco, provided that some additional conditions are satisfied - which typically will not be onerous for wholly-owned FAs having only one class of shares.  This interpretation does not discuss the scenario where the subsequent dividend to Canco is not paid until Year 3.

Neal Armstrong.  Summary of 3 April 2013 T.I. 2012-0460671E5  under Reg. 5907(1) – Underlying Foreign Tax Applicable.