Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether we would consider a loan from a creditor affiliate to Canco to be repaid for the purposes of the upstream loan rules when the creditor affiliate is liquidated and the upstream loan is not repaid prior to or as part of the liquidation.
Position: No.
Reasons: There is no repayment of the loan on the liquidation of the creditor affiliate.
Canadian Tax Foundation (CTF) Conference
Canada Revenue Agency Roundtable
November 24, 2015
2015 CTF Question 8: Liquidation of a foreign affiliate and upstream loans
If a foreign affiliate (the creditor affiliate) has made a loan to its Canadian shareholder (Canco), and the loan is not repaid within two years, the loan would be subject to the upstream loan rules such that the amount of the loan is included in Canco’s income pursuant to subsection 90(6) of the Income Tax Act. Would the loan from the creditor affiliate to Canco be considered to be repaid for the purposes of the upstream loan rules when the creditor affiliate is liquidated and the upstream loan is not repaid prior to or as part of the liquidation?
CRA Response
We would not consider the loan to have been repaid for purposes of the upstream rules as a result of the liquidation in the described situation. Therefore, Canco would not be entitled to a deduction under subsection 90(14).
Denise Basso
2015-061062
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