15 May 2024 IFA Roundtable Q. 6, 2024-1007591C6 - PLOI Election Administrative Relief

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: Clarification of new administrative relief relating to PLOI election.

Position: As of March 25, 2022, the CRA has adopted an administrative policy that requires only one election to be made in respect of each loan or indebtedness governed by the same agreement owing by each non-resident person. If the electors no longer wish to have the PLOI election apply to amounts borrowed in a subsequent taxation year, they should have those amounts governed under a separate agreement.

Reasons: This policy is intended to provide administrative relief in respect of agreements under which all amounts, for the duration of the agreement, are desired by the electors to be treated as a PLOI.

All references herein to a section, subsection, paragraph, subparagraph or clause is a reference to the relevant provision of the Income Tax Act, R.S.C. 1985 (5th Suppl.) c.1, as amended

2024 IFA Annual Conference
CRA Roundtable

QUESTION 6: Administrative Relief for PLOI election.

As of March 25, 2022, the Canada Revenue Agency (“CRA”) has adopted an administrative policy that requires only one “pertinent loan or indebtedness (“PLOI”) election to be made in respect of each loan or indebtedness governed by the same agreement owing by each non-resident person (“Administrative Relief”). Assuming a particular taxpayer (the “Taxpayer”) was eligible for the Administrative Relief, no election would be required in respect of amounts borrowed under the same loan or indebtedness instrument in a subsequent taxation year. However, if the Taxpayer does not wish to have a PLOI election apply to amounts borrowed in a subsequent taxation year (i.e. amounts advanced after the initial year for which the single PLOI election is filed and for which the same legal instrument remains in place), is the Taxpayer required to provide notification to the CRA?

CRA Response

The view of the CRA continues to be that, in interpreting the term "amount" in subsection 15(2.11) or 212.3(11) in relation to a loan or an indebtedness, each increase in a loan or indebtedness balance is treated as a unique amount of indebtedness.

As the question states, in 2022 the CRA adopted the Administrative Relief policy. This policy is intended to provide administrative relief in respect of agreements under which all amounts, for the duration of the agreement, are desired by the electors to be treated as a PLOI. Where the intention is to have only certain amounts of loans or indebtedness made under an agreement be treated as a PLOI, the Administrative Relief does not apply. In such a case, a separate election is required for any amount of loan or indebtedness arising under the agreement to qualify as a PLOI.

Taxpayers who have opted in to the application of the Administrative Relief through jointly filing a single election in writing in respect of all amounts governed by the same agreement and who no longer wish to have the PLOI election apply to amounts borrowed in a subsequent taxation year should have those amounts governed under a separate agreement.

Taxpayers wishing to have the Administrative Relief applied in respect of amounts of loans or indebtedness arising under one agreement should check the “yes” box in field 100 of form T1521 or T2311, as applicable. Taxpayers wishing for the Administrative Relief not to be applied should file a separate election for each separate amount, checking the “no” box in field 100 of each form.

Regardless of whether the Administrative Relief applies, taxpayers must keep all information and documentation supporting the subsection 17.1(1) deemed income inclusion, including detailed information on each amount relevant to that income, in case the CRA asks for it.

Jess Johns
May 15, 2024