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", COVID-19 and Canadian Tax for the Owner-Manager/Canadian Tax Focus (Canadian Tax Foundation), July 2020, p. 4-- summary under Eligible Remuneration Summary Under Tax Topics- Income Tax Act- Section 125.7- Subsection 125.7(1)- Eligible Remuneration Example of Treaty-exempt U.S. corp employee US employees in Canada for several days a quarter (p. 4) Consider the case of a US-resident corporation, NR Co, that provides services in Canada … [and] does not have a permanent establishment in Canada … [has] a payroll account in Canada, which it maintains in respect of its US-resident employees who work in Canada on an intermittent basis … [and] had the requisite decline in qualifying revenue …. ... Treaty-exempt non-resident can be an eligible entity (p. 4) NR Co is an eligible entity because it is a corporation and is not exempt from tax. … Mostly non-resident payroll might be eligible remuneration if some Canadian withholding (p. 4) … The salary paid to A in respect of the services performed in Canada will qualify [as eligible remuneration] only if NR Co has not applied for a non-resident employer certification pursuant to paragraph 153(7)(a). … [A]mounts paid at any time by an employer to an employee at a time that the employer is a "qualifying non-resident employer" and the employee is a "qualifying non-resident employee" are excluded [from “eligible remuneration”]. … If NR Co chooses not to file an application pursuant to paragraph 153(7)(a) to be classified as a qualifying non-resident employer, or is not eligible to be considered a qualifying non-resident employer for some other reason (for example, failing to comply with the requirements of the certified non-resident employer program), it would be liable to withhold, but it would be eligible for the CEWS. ...

. … Canco has a $10 trade payable to Subject Corp. at the acquisition time for goods previously purchased from Subject Corp. and used in Canco's active business. ... However, Canco's Bad Assets to Total Assets ratio after Canco repays its indebtedness to Subject Corp. is 80% [fn 33: Bad Assets = ($80 Investment in Subject Corp.) over Total Assets = $100 ($20 in business assets + $80 investment in Subject Corp.) = $80] (greater than 75%). ...

See also CRA Document No. 9831647, Lawyer's trust account, February 19, 1999, and CRA Document No. 2007-0233761C6, 2007 Step Conference – Question 1 – In-trust accounts. ...

[T]he CRA stated in a technical interpretation issued in March 2014 [fn 10: … 2012-0471021E5 …] that the amount of partnership safe income attributable to shares of a corporate partner to which the rules in section 34.2 apply should be the adjusted stub period accrual for the year. ... [fn 11: … 2007-0243151C6 …] While some may question whether this former position is supported by case law, [fn 12: See, for example, Canada v. ... [I]n VIH Logging … Woods J recognized that permitting the inclusion of stub period income is an unusual interpretation of paragraph 55(3)(c), which deems income earned and realized for a period to be the taxpayer's income as determined under the Act for the period; however, it was seen as "the only reasonable interpretation. ...

Similarly, he states (at p. 450) that "the discussion draft gives the appearance — perhaps unintended — of acquiescing in the notion that when one related entity exercises control and another performs the actual intangibles-creating activities, the presumptively most reliable transfer pricing method under the arm's-length principles is for the party exercising control to retain the residual right to income from the resulting IP," and makes the following suggestion (also at p. 450): If the arm's-length principle is to be applied properly, the relative contributions of those managing and those implementing intangibles-creating activities need to be determined so that an arm's-length division of income between the two can be determined. The best indicator of that arm's-length division of income normally will be the relative values that the multinational group itself places on the managers and on the implementers — that is, the relative values of their compensation. ...

. … [T]he question arises…whether such an “investment” by the Canadian Subsidiary will qualify for the related party reorganization exception in subparagraph 212.3(18)(a)(i). ... Acquisition of foreign parent (“FP”) followed by transfer of FA between FP child and grandchild (p. 22) [C]anco1 owns all of the shares of Canco2 and … Canco1 has always been owned and controlled by a … FP …. [A]n arm's length foreign corporate acquirer will acquire all of the shares of FP… [I]t is desired,…to move foreign affiliate shares or debt historically held by Canco1 to Canco2 or vice-a-versa. … [N]either Canco1 nor Canco2 could transfer foreign affiliate shares or debt from one to the other and rely on the subparagraph 2l2.3(l8)(a)(i) exception. ...

(p. 1001) Canadian Inbound — Forward Subscription Method A U.S. corporation (USCo) may enter into a double-dip forward subscription financing arrangement with a Canadian operating company (Canco). ... As interest becomes payable it will, in effect, be retained by the Canadian acquisition company through directions on account of the subscription price for shares by LLC under the forward subscription agreement: Canco pays interest on debt to USCo; USCo directs that the amount be paid to LLC under its support obligations; and LLC redirects that Canco retain the amount on account of the subscription price for shares of Canco under the forward subscription agreement — Canco issues shares to LLC. ...

. … [T]he optimal structure … involves AII being earned by a C corporation that is a CFA of a CCPC. ...

Limitation to GREs (p.8) … We understand that Finance restricted the comfort letter to GREs in part because subsection 164(6) limits to one year the period within which loss carryback planning is available. In contrast, life interest trusts (LITs)—such as alter ego, spousal, and joint partner trusts—typically have three taxation years to carry back losses. … LITs are in a materially identical position to GREs …. Alternate transactions for life interest trusts (pp. 8-9) … Assume that the LIT transfers its shares of Opco for Holdco shares alone (that is, without receiving any non-share consideration). ...

Groupe Honco finding of multiple "main" purposes (pp. 9-10) In Groupe Honco (… 2013 FCA 128)…[t]he FCA said, "The phrase 'one of the main purposes' is unambiguous and implies that a taxpayer may have more than one main motive in acquiring shares. ... " … (The UK decisions referred to are Prudential Plc v. Revenue & Customs, [2007] UKSPC 636; IRC v. ... Revenue & Customs, [2012] UKFTT 104 (TC).) U.K. approach is better (p.10) The approach of the UK courts (to perhaps omit the words "one of" and turn the phrase into a simple "main purpose" test) and of the Canadian courts, as in Honco (to effectively drop the word "main" and make the phrase into a "one of the purposes" test), both attest to the uncertainty of the language. ...