Principal Issues: In the context of a notional cash pooling arrangement, whether the right provided to an arm's length non-resident bank by pool participants to offset overdraft balances with deposit balances or the use of deposit balances to offset overdraft balances upon the exercise of that right constitutes a specified right as defined in subsection 18(5)?
Position: Not answered.
Reasons: Notional cash pooling arrangements of the type described raise issues both in respect of the thin capitalization rules and the non-resident withholding tax rules. The concept of a “specified right”, which is the main focus of your question, is relevant in the application of the new “back-to-back loan” rules contained in section 18, in respect of thin capitalization, and in section 212, in respect of non-resident withholding tax.
