Subsection 212.1(1) - Non-arm’s length sales of shares by non-residents
See Also
Dairy Queen Canada Inc. v. The Queen, 95 DTC 634, [1995] 2 CTC 2543 (TCC)
Bell TCJ. found on the basis of the testimony of various executives that shares of a Canadian corporation ("OJC") were acquired by the taxpayer's...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Fair Market Value - Shares | 82 |
Administrative Policy
11 July 2007 External T.I. 2006-0192101E5 F - Disposition d'actions par un non-résident
A non-resident individual who had acquired shares of a Canadian real estate company with a low paid-up capital and a high adjusted cost base...
Subsection 212.1(1.1)
Paragraph 212.1(1.1)(b)
Administrative Policy
2017 Ruling 2017-0699201R3 - Cross-border Butterfly
CRA ruled on a cross-border butterfly which entailed assets of the “Transferred Business” being transferred indirectly to a wholly-owned...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution | cross-border butterfly with 4-party exchange and preceding distribution of DC to foreign parent to qualify as permitted exchange/rental property valued at nil/post-butterfly equaling cash payment | 1140 |
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Permitted Exchange - Paragraph (b) | cross-border butterfly including preliminary transfer of DC to foreing parent to come within “permitted exchange” | 444 |
| Tax Topics - Income Tax Act - Section 143.3 - Subsection 143.3(3) | s. 143.3(3) inapplicable on a 4-party exchange | 234 |
| Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base | full cost of property acquired under 4-party exchange | 222 |
2013 Ruling 2012-0459781R3 - Cross border butterfly
This was a cross-border butterfly of a Canadian spin business (already packaged into a subsidiary of DC) by DC to TC, an indirect subsidiary of...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution | cross-border butterfly reversing previous amalgamation and using 4-party exchange | 1120 |
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(3.2) - Paragraph 55(3.2)(h) | 4-party exchange to avoid s. 55(3.2)(h) | 115 |
Subsection 212.1(4) - Where section does not apply
Cases
Univar Holdco Canada ULC v. Canada, 2017 FCA 207
A non-resident's acquisition of the shares of a Netherlands public company (Univar NV) indirectly holding the shares of a valuable Canadian...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | cross-border surplus-stripping transaction was not abusive as it occurred in same series as arm's length acquisition | 404 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(2) | the result achieved (no s. 212.1 withholding) accorded with the underlying policy of permitting surplus stripping as part of an arm’s length acquisition | 109 |
See Also
Univar Holdco Canada ULC v. The Queen, 2016 TCC 159, rev'd 2017 FCA 207
At the time of the acquisition of Univar NV (a Netherlands public corporation), the shares of a Canadian operating subsidiary (“Univar...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | exception to an anti-avoidance provision should not be interpreted to undercut that anti-avoidance | 259 |
| Tax Topics - Statutory Interpretation - Interpretation Act - Subsection 45(3) | policy of current version of s. 212.1(4) confirmed by proposed amendment | 142 |
Administrative Policy
2021 Ruling 2020-0875391R3 - Post-acquisition restructuring
See Intact and Tryg acquisition of RSA for summary of subject transactions as implemented.
Background
The Taxpayer (a Canadian public corporation...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1.5) | application of s. 15(1.5) to demerger to split active businesses between two sets of countries | 328 |
2 December 2014 CTF Roundtable, Q. 4
At the May 2013 IFA Conference, CRA indicated that the GAAR Committee had determined that GAAR applies to cases involving post-acquisition and...
24 May 2013 IFA Roundtable Q. 4, 2013-0483771C6 - 2013 IFA Q4
Consider these facts:
- NRCo owns Forco. Forco owns 100% of a Canadian operating subsidiary (CanOpco). The paid-up capital (PUC) of the shares of...
Articles
Nathan Boidman, "Judicial and Legislative Developments Threaten Indirect Canadian Acquisitions", Tax Notes International, Vol. 84, No. 2, 10 October 2016, p. 163
Amendment will attack sandwiches created on 3rd-party acquisitions (p. 168)
The proposed amendment will attack not only an internal reorganization...
Angelo Nikolakakis, "Cross-Border Surplus Stripping – Stripping Bona Fide Non-Resident Purchasers", International Tax (Wolters Kluwer CCH), No. 87, May 2016, p.4
Prejudice to Canadian shareholder of the Canadian purchaser if a non-arm's length non-resident shareholder (p. 7)
[I]f a resident and a...
Angelo Nikolakakis, Alain Léonard, "The Acquisition of Canadian Corporations by Non-Residents: Canadian Income Tax Considerations Affecting Acquisition Strategies and Structure, Financing Issues, and Repatriation of Profits", 2005 Conference Report, c. 21, p. 21:8.
In step 1 of figure 4, Bidder transfers Target to Bidder Forco in exchange for a promissory note ("the Bidder Forco reorganization note") with a...
Vesely, Roberts, "Takeover Bids: Selected Tax, Corporate, and Securities Law Considerations", 1991 Conference Report, pp. 11:30-11:31
Discussion of technique for avoidance of s. 212.1 where a non-resident acquirer is making a bid for shares of a Canadian target.
Subsection 212.1(6)
Articles
Kyle B. Lamothe, Alexander Demner, "Section 212.1 Post Mortem Pipeline Comfort Letter", Tax for the Owner-Manager, Vol. 20, No. 2, April 2020, p. 8
December 2, 2019 comfort level (p.8)
The comfort letter recognizes that paragraph 212.1(6)(b) can give rise to double-tax results "not consistent...
Alexander Demner, Kyle B. Lamothe, "Section 212.1 Lookthrough Rules Create Issues for Trusts with Non-Resident Beneficiaries", Tax for the Owner-Manager, Vol. 19, No. 2, April 2019, p. 2
Results of pipeline for estate with non-resident beneficiary where the new Holdco issues notes (p. 3)
Ms. A divided her estate equally between two...
Henry Shew, "Post Mortem Pipeline Fails for Non-Resident Beneficiaries", Canadian Tax Focus, Vol. 9, No. 1, February 2019, p. 1
Result if s. 212.1 applies where a non-resident beneficiary (p. 1)
[A]n estate has three beneficiaries - … and one is a non-resident—and the...
Paragraph 212.1(6)(b)
Administrative Policy
2021 Ruling 2019-0800431R3 - Alter Ego Post-mortem Pipeline and Bump Planning
Around when he was placed in a long-term care facility, the “Deceased” transferred his shares of two companies with investing businesses (Aco...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 84 - Subsection 84(2) | pipeline for alter ego trust with preliminary elimination of NR beneficiary and application of s. 88(1)(d.3) | 367 |
| Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(d.3) | s. 88(1)(d.3) applied to securities held by investing corportions whose shares were stepped up in hands of alter ego trust and then transferred to and amalgamated under pipeline | 202 |
3 December 2019 CTF Roundtable Q. 5, 2019-0824561C6 - 212.1 Post-mortem Pipeline Transaction
In a post-mortem “pipeline” transaction, a Canadian resident estate (the “Trust”) has full ACB and low paid-up capital in shares of a...
Finance
2 December 2019 Comfort Letter - Cross-Border Surplus Stripping & Graduated Rate Estates
Finance first noted that in a pipeline transaction (entailing the estate selling the shares of Canco (whose ACB was stepped up on death) to a...
Articles
Joint Committee, "July 27, 2018 Legislative Proposals", 10 September 2018 Submission
Look-through of corporations (pp. 12-13)
S. 212.1(6)(b), which applies a look-through rule for the purpose of having s. 212.1 apply on a...