Finance proposes to extend the s. 95(2)(a)(ii)(D) safe harbour to inter-FA fees that are deemed FAPI under s. 95(2)(b)(i)(B)(I)
S. 95(2)(b)(i)(B)(I) provides that if FA1 provides services to FA2 then, to the extent that the fees therefor paid by FA2 are deductible in computing its foreign accrual property income, they are included in FA1’s FAPI. This result is inappropriate where the fees so paid by FA2 are deducted in relation to its investment in shares of an Opco that are excluded property. Accordingly, Finance has provided a comfort letter that it will propose that s. 95(2)(b)(i)(B)(I) not apply in this type of situation, which is conceptually described as one where conditions generally analogous to those in s. 95(2)(a)(ii)(D) are satisfied respecting FA1’s services income.
Neal Armstrong. Summary of 23 December 2016 Comfort Letter under s. 95(2)(b)(i)(B)(I).