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.
Dear Sirs:
This is in reply to your letter of June 17 concerning the application of subparagraph 212(1)(b)(vii) of the Income Tax Act.
You have presented a situation concerning a United States bank which is a non-resident of Canada. It proposes to lend money in U.S. currency to an arm's length Canadian resident borrower. The proposed loan will bear interest payable in U.S. currency and all principle repayments to be made by the borrower to the U.S. lender will also be in U.S. currency.
The proposed agreement provides that 24 per cent of the principal amount of the loan (in U.S. currency) will be repaid by the borrower within five years from the date upon which the principal was advanced by the bank. The balance of the principal will be repaid in U.S. currency after the aforesaid five year period has expired.
In connection with the five year repayment requirement in subparagraph 212(1)(b)(vii), it is our position that foreign currency fluctuations of the Canada dollar as against the U.S. dollar will not be taken into account in determining as at a particular date whether the Canadian borrower is under any circumstances obliged to pay are than 25% of the principal amount of the loan referred to above within five years of the date of issue.
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© Her Majesty the Queen in Right of Canada, 1980
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© Sa Majesté la Reine du Chef du Canada, 1980
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