CRA rules that a four-day loan made by Canco to its non-resident parent at each quarter end for financial statement manipulation purposes is not part of a series of loans and repayments

In order that their indirect non-resident public company parent can prepare its quarterly and annual consolidated financial statements on a basis that nets the positive bank account balances of some group members (including Canco) against the bank overdraft positions of other group members including the non-resident parent of Canco (Parentco): at the end of each quarter, Canco will make an advance (to be repaid several days later) of its excess cash balance to Parentco; and Parentco at the same time will receive (or make) similar loans from (or to) its other subsidiaries (all non-resident) based on their excess (or deficit) balances.

CRA ruled that these regularly re-occurring Canco loans and repayments do not represent a "series of loans ... and repayments" under s. 15(2.6) so that no withholding tax will arise under s. 214(3)(a), given that s. 15(2.6)  "is intended to prevent, by temporary repayment, a deferral of the recognition as income of amounts that are advanced as loans… [and] the four 4-day loans made in this case are not for the purpose of deferring the recognition of the loaned amounts as income, and the repayment of each loan in this case is not temporary."

Neal Armstrong.  Summary of 2014 Ruling 2013-0505181R3 under s. 15(2.6).