CRA narrowly construes the s. 95(3)(b) safe harbour for “services performed in connection with the… sale of goods”

In s. 95(3)(b) there is a safe harbour - from the general rule in s. 95(2)(b)(i) that income of a foreign affiliate from providing services to its Canadian parent (which are deductible in computing the parent’s Canadian business income) is foreign accrual property – for "services performed in connection with the purchase or sale of goods."  CRA’s position is "that only services directly related to such sales so qualify," so that services of a foreign affiliate in testing prototypes (manufactured by its Canadian parent) of goods that would subsequently be manufactured and sold by the parent, were found not to qualify.

Neal Armstrong.  Summaries of 13 January 2015 Memo 2013-0497361I7 F under s. 95(3)(b) and s. 95(3)(d).