Principal Issues: 1) Whether treaty benefits apply to interest payments on intercompany debt owing by a Canadian-resident corporation that is fiscally transparent for United States tax purposes. 2) Whether principal amount of intercompany debt owed by Canadian-resident subsidiary to its Canadian-resident holding company is deemed to be owed to non-resident under s. 18(6). 3) Interest Deductibility.
Position: 1) Yes. 2) No. 3) Subject to reasonableness and thin capitalization restrictions, interest is deductible.
Reasons: 1) Interest will be considered to receive “same treatment” for the purposes of Article IV(7)(b). 2) Existing position. 3) Meets the requirements of s. 20(1)(c).