CRA confirms that the s. 115.2 safe harbour can extend to lending and that administrative services by themselves may be excluded on general principles

A limited partnership (“Foreign LP”) has exclusively non-resident partners and its Canadian corporate general partner has delegated the management of its activity of making loans to an affiliated Canadian-resident manager. Regarding the application of the safe-harbour rule as to the limited partners being considered to carry on business in Canada through the Manager, CRA indicated that the making of loans by the Manager on behalf of Foreign LP would generally qualify as “designated investment services” given that “there is no indication that an acquisition, holding and disposition of a debt acquired on original issue through the services of a Canadian service provider are meant to be excluded from the application of subsection 115.2(2).”

Although the definition of “designated investment service” relevantly excluded only investment management and advice, CRA indicated that mere administrative services performed by the Manager would not by themselves cause the limited partners to be considered to be carrying on business in Canada (and similarly regarding any administrative services of the GP.)

Neal Armstrong. Summaries of 17 November 2023 External T.I. 2023-0965891E5 under s. 115.2(1) – Designated investment services, paras. (b), (a).