Section 95

Table of Contents

Subsection 95(1) - Definitions for this subdivision

Controlled Foreign Affiliate

Administrative Policy

2016 Ruling 2015-0571441R3 - Dutch Cooperative - 93.2 & 95(2)(c)

Forco 1 is held through three stacked Canadian partnerships (the bottom one, “CanGP 3”) by two taxable Canadian corporations (Canco 1D and...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(c) rollover is available on joint drop-down of shares of a Dutch private limited liability company into a Dutch cooperative in consideration for respective credits to the membership accounts 502
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Corporation Dutch cooperative whose articles limited member liability was a corp 263
Tax Topics - Income Tax Act - Section 93.2 - Subsection 93.2(2) membership interest in Dutch cooperative ruled to be shares 92
Tax Topics - Income Tax Act - Section 85.1 - Subsection 85.1(3) joint contribution of shares of FA to Netherlands co-op in consideration for credits to their respective membership accounts deemed to be for share consideration 57

28 August 2003 Internal T.I. 2003-0019767 F - Investissement dans une société étrangère

All the shares of Foreignco, which made investments in stock market shares, were held by Mr. A (apparently, non-resident). Mr. B (apparently,...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 17 - Subsection 17(1) redeemable convertible rights of a Canco investor in Foreignco had not been redeemed, so that they were not debt for s. 17 purposes and Foreignco was not a CFA 141
Tax Topics - Income Tax Act - Section 94.1 - Subsection 94.1(1) inferred satisfaction of main reason test where all stock market investment income and gains were reinvested free of local tax 377

22 July 2003 Internal T.I. 2003-0018027 F - Fondation du Liechtenstein

Mr. X formed a foundation (a “sifting”) under the laws of Liechtenstein, of which he was the life beneficiary, and his wife and children were...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Corporation Liechtenstein sifting was a corporation rather than trust 60
Tax Topics - Income Tax Act - Section 94 - Subsection 94(3) Liechtenstein siftung was corporation, not trust 79

93 C.M.T.C - Q.1

It is not necessary to establish that the persons resident in Canada are acting in concert to control the affiliate. The threshold in s....

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Paragraph (b)

Administrative Policy

20 June 2023 STEP Roundtable Q. 7, 2023-0959581C6 - Deemed Resident Trust and the Resident Portion

49% of the shares of a non-resident corporation owned by a non-resident trust which has made a valid s. 94(3)(f) election were included in the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 94 - Subsection 94(1) - Resident Portion illustration of the resident portion rules for a s. 94 trust that inter alia has lent to a resident beneficiary or earns FAPI 492
Tax Topics - Income Tax Act - Section 94 - Subsection 94(2) - Paragraph 94(2)(a) contribution to NR trust where beneficiary pays expenses of trust property 103
Tax Topics - Income Tax Act - Section 94 - Subsection 94(2) - Paragraph 94(2)(g) - Subparagraph 94(2)(g)(iv) application where a s. 94 trust lent to a resident beneficiary, and when loan repaid 177

Excluded Property

Administrative Policy

27 March 2018 Internal T.I. 2015-0592551I7 - Excluded property status of partnership interest

Canadian-resident Parent wholly-owned Canco2 and Canco1. Two wholly-owned controlled foreign affiliates of Canco2 (“NR1” and “NR2”)...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 5908 - Subsection 5908(10) partnership interests no longer were excluded property on dissolution given prior disposition of s. 95(2)(a)(ii) loans/potential qualification of partnership interest under para. (c) ignored 297
Tax Topics - Income Tax Regulations - Regulation 5903 - Subsection 5903(5) - Paragraph 5903(5)(b) foreign affiliate parent cannot carry back FAPLs generated by wound-up foreign affiliate 389
Tax Topics - Income Tax Act - Section 96 Icelandic Sameignarfelag was partnership 198
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(f.14) once partnership interests were no longer excluded property, the components of their ACB calculation was to be translated at the rates when those components first arose 254
Tax Topics - Income Tax Act - Section 98 - Subsection 98(2) partnership interest disposition occurred no sooner than final distribution date 79

2015 Ruling 2014-0536661R3 - Disposition of property by a foreign partnership

CRA ruled that a distribution of the assets of a mine held by the partnership did not give rise to foreign accrual property income provided that...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Property Income reliance on excluded property exclusion on dissolution of Foreign LP as a result of the wind-up of its FA partners 421

6 March 2015 Internal T.I. 2014-0549761I7 - Internally generated goodwill & excluded property

Is internally generated goodwill considered in determining whether shares of a foreign affiliate ("FA2") of a corporation resident in Canada...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 149 - Subsection 149(10) unpurchased goodwill is taken into account 96
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Small Business Corporation unpurchased goodwill is taken into account 105

15 January 2015 External T.I. 2014-0546581E5 - Partnership interest excluded property

Mr. B wholly-owns Canco 3 and Canco 4, and Mr. A, who is unrelated, wholly-owns Canco 1 and Canco 2. Canco 2 and Canco 3 each holds 50% of Forco,...

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1 September 2009 External T.I. 2006-0168571E5 - Excluded property

Canco's wholly-owned subsidiary Forhold 2 has a 30% interest as general partner in LP1 which has a 15% LP interest in LP2 which, in turn, has 75%...

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21 September 2007 External T.I. 2007-0251651E5 - Excluded property

A Canadian resident individual owns 100% of a corporation ("FA") resident in the Netherlands which, in turn, has an interest in a partnership, all...

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1 November 2000 External T.I. 1999-0009725 - Foreign affiliates meaning of group

A foreign affiliate ("Holdco") owns all the shares of a second foreign affiliate ("Subco A") which, in turn, owns all the shares of a third...

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6 January 1999 External T.I. 9829785 - FOREIGN AFFILIATE-ACTIVE BUSINESS INCOME

Where a foreign subsidiary of Canco deposits a sum with a foreign bank to secure its guarantee of a loan made by the foreign bank to another...

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10 March 1998 External T.I. 9804895 - definition of excluded property

Where a grandchild foreign factoring subsidiary acquires substantially all its trade receivables from a foreign subsidiary of the taxpayer that...

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22 December 1997 External T.I. 9709775 - DEFINITION OF EXCLUDED PROPERTY

Intangible property that is capital property and that is used by a controlled foreign affiliate principally in producing deemed active business...

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18 June 1996 External T.I. 9523595 - EXCLUDED PROPERTY STATUS - PARTNERSHIP STRUCTURES

Example A

Canco owns 100% of Forhold, which has a 90% interest in a partnership (P1), whose only assets are 25% of the shares of a foreign...

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Articles

Paul Barnicke, Melanie Huynh, "FA's LP Interest: Excluded Property?", (2015) vol. 23, no. 4 Canadian Tax Highlights, 4-5

Alternative result in 2014-0546581E5 if additional partnership interest held by related Cdn corp through an FA (p. 5)

If Canco 4 [in

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Shawn D. Porter, David Bunn, "Excluded Property and Foreign Rollovers: Interpretive Issues in the Partnership Context", International Tax Planning (Federated Press), 2010, p.1060

Potential bases for overcoming non-excluded property (“EP”) finding in 2006-0168571E5 re absence of related partnerships concept (p....

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Paragraph (a)

Administrative Policy

8 October 2010 Roundtable, 2010-0373531C6 F - Qualification de bien exclu - 95(1)

In a scenario where an FA earns active business income and income other than active business income, how can it be determined whether a licence it...

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Articles

Tina Korovilas, Drew Morier, "Non-Corporate Vehicles in the Foreign Affiliate Context", 2018 Conference Report (Canadian Tax Foundation), 20:1 – 114

Potential qualification of partnership interest under EP – para. (a) if (e) unavailable (p. 20:55)

  • CRIC 1 owns 50 percent of the shares of an...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 122
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) 111
Tax Topics - General Concepts - Ownership 245
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(11.2) - Paragraph 5907(11.2)(b) 181
Tax Topics - Income Tax Act - Section 90 - Subsection 90(1) 99
Tax Topics - Income Tax Act - Section 93.1 - Subsection 93.1(2) - Paragraph 93.1(2)(a) 120
Tax Topics - Income Tax Act - Section 93.1 - Subsection 93.1(2) - Paragraph 93.1(2)(d) - Subparagraph 93.1(2)(d)(i) 80
Tax Topics - Income Tax Regulations - Regulation 5901 - Subsection 5901(2) - Paragraph 5901(2)(b) 91
Tax Topics - Income Tax Act - Section 93 - Subsection 93(1.3) 168
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (e) 155
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (c) 290
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(y) 64
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph. 95(2)(z) 332
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(B) - Subclause 95(2)(a)(ii)(B)(II) 169
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(D) 688
Tax Topics - Income Tax Act - Section 94 - Subsection 94(1) - Exempt Foreign Trust - Paragraph (h) - Subparagraph (h)(ii) - Clause (h)(ii)(C) 615

Paragraph (b)

Articles

Raj Juneja, Pierre Bourgeois, "International Tax Issues That Get in the Way of Doing Business", 2019 Conference Report (Canadian Tax Foundation), 36:1 – 42

Circularity element in determining excluded property status where material upstream loans

  • Where an acquisition target is a holding company that...

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Paragraph (c)

Articles

Tina Korovilas, Drew Morier, "Non-Corporate Vehicles in the Foreign Affiliate Context", 2018 Conference Report (Canadian Tax Foundation), 20:1 – 114

Initial concern re s. 95(1) – EP – para. (c) that property of the partnership could not qualify (pp. 20:56-59)

When the EP definition was...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 122
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) 111
Tax Topics - General Concepts - Ownership 245
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(11.2) - Paragraph 5907(11.2)(b) 181
Tax Topics - Income Tax Act - Section 90 - Subsection 90(1) 99
Tax Topics - Income Tax Act - Section 93.1 - Subsection 93.1(2) - Paragraph 93.1(2)(a) 120
Tax Topics - Income Tax Act - Section 93.1 - Subsection 93.1(2) - Paragraph 93.1(2)(d) - Subparagraph 93.1(2)(d)(i) 80
Tax Topics - Income Tax Regulations - Regulation 5901 - Subsection 5901(2) - Paragraph 5901(2)(b) 91
Tax Topics - Income Tax Act - Section 93 - Subsection 93(1.3) 168
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (e) 155
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (a) 368
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(y) 64
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph. 95(2)(z) 332
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(B) - Subclause 95(2)(a)(ii)(B)(II) 169
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(D) 688
Tax Topics - Income Tax Act - Section 94 - Subsection 94(1) - Exempt Foreign Trust - Paragraph (h) - Subparagraph (h)(ii) - Clause (h)(ii)(C) 615

Paragraph (e)

Articles

Tina Korovilas, Drew Morier, "Non-Corporate Vehicles in the Foreign Affiliate Context", 2018 Conference Report (Canadian Tax Foundation), 20:1 – 114

Narrowness of the postamble to the excluded property (EP) definition (p. 20:53)

[A]lthough the partnership postamble applies for the purposes of...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 122
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) 111
Tax Topics - General Concepts - Ownership 245
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(11.2) - Paragraph 5907(11.2)(b) 181
Tax Topics - Income Tax Act - Section 90 - Subsection 90(1) 99
Tax Topics - Income Tax Act - Section 93.1 - Subsection 93.1(2) - Paragraph 93.1(2)(a) 120
Tax Topics - Income Tax Act - Section 93.1 - Subsection 93.1(2) - Paragraph 93.1(2)(d) - Subparagraph 93.1(2)(d)(i) 80
Tax Topics - Income Tax Regulations - Regulation 5901 - Subsection 5901(2) - Paragraph 5901(2)(b) 91
Tax Topics - Income Tax Act - Section 93 - Subsection 93(1.3) 168
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (a) 368
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (c) 290
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(y) 64
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph. 95(2)(z) 332
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(B) - Subclause 95(2)(a)(ii)(B)(II) 169
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(D) 688
Tax Topics - Income Tax Act - Section 94 - Subsection 94(1) - Exempt Foreign Trust - Paragraph (h) - Subparagraph (h)(ii) - Clause (h)(ii)(C) 615

Foreign Accrual Property Income

Cases

Loblaw Financial Holdings Inc. v. Canada, 2020 FCA 79, aff'd 2021 SCC 51

After noting (at para. 48) that "the exclusions [in the s. 95(1) investment business definition] generally further the fundamental purpose of the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Investment Business - Paragraph (a) a Barbados bank sub conducted its business of investing in short-term debt principally with arm’s length persons 602
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Business receipt of equity funds from parent was not part of Barbados bank’s business 188
Tax Topics - Statutory Interpretation - Redundancy/reading in words error to apply an unexpressed intention 172
Tax Topics - Statutory Interpretation - Drafting Style no additional requirements should be inferred in legislation drafted with “mind-numbing detail” 172
Tax Topics - General Concepts - Separate Existence subsidiary did not manage its funds on behalf of parent 161

See Also

A.G. Canada v. Le Groupe Jean Coutu (PJC) Inc., 2015 QCCA 838, aff'd 2016 SCC 55

The taxpayer implemented a plan, to neutralize the effect of FX fluctuations on its investment in a U.S. sub, that overlooked FAPI considerations...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Rectification & Rescission transactions achieved purpose of neutralizing FX fluctuations and were not intended to avoid FAPI 256

Rostland Corp. v. The Queen, [1995] 2 CTC 2276, 96 DTC 1973 (TCC)

Two indirect wholly-owned foreign subsidiaries of the taxpayer ("Texas" and "BV") held non-recourse promissory notes of an arm's length...

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Canada Trustco Mortgage Co. v. MNR, 91 DTC 1312, [1991] 2 CTC 2728 (TCC)

The taxpayer's Netherlands subsidiary, whose income was derived from Canadian mortgages which it had purchased from, and were administered by, its...

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Alexander Cole Ltd. v. MNR, 90 DTC 1894, [1990] 2 CTC 2437 (TCC)

A wholly-owned U.S. subsidiary of the taxpayer, which had been engaged (through U.S. limited partnerships) in commercial real estate projects,...

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King George Hotels Ltd. v. The Queen, 81 DTC 5082, [1981] CTC 87 (FCA)

It was "stressed that whether a business is an active or inactive one is ... [a question] of fact dependent on the circumstances of each case ......

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Administrative Policy

2015 Ruling 2014-0536661R3 - Disposition of property by a foreign partnership

Current structure

Canco wholly owns Foreign Holdco, which wholly owns Foreign Subco1, the owner and operator of Mine 1 in Country X. Foreign...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property still dormant mine as excluded property 65

30 August 2004 External T.I. 2003-000135

A grandchild foreign subsidiary of Canco ("FA2") is wound-up into an immediate foreign subsidiary of Canco ("FA1") at a time that a note owing by...

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26 March 2004 External T.I. 2003-0047061E5 - Foreign currency and FAPI

Where a foreign affiliate earns foreign accrual property income (rental income) of U.S.$50,000 throughout a year, the average exchange rate for...

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27 November 1998 External T.I. 9822835 - FOREIGN AFFILIATES - FOREIGN ACCRUAL TAX

Where U.S. taxes are paid by U.S. C.-corp. (which is a foreign affiliate of the Canadian taxpayer) in respect of the investment business of a U.S....

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Tax US tax paid by USco on income of LLC not FAT unless income distributed to USco 291
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1) - Underlying Foreign Tax - A - Subparagraph (iii) tax paid by C-Corp CFA regarding its share of LLC income is not added to its UFT until that income is dividended to it 143

17 January 1991 T.I. (Tax Window, Prelim. No. 3, p. 2, ¶1094)

The interest income of a controlled foreign affiliate on a foreign currency deposit denominated in a currency which was depreciating rapidly...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 39 - Subsection 39(2) 42

85 C.R. - Q.15

After the Burri decision, whether income of a foreign affiliate is active business income or property income will continue to be determined by the...

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Articles

Joint Committee, "Guidance on International Income Tax Issues raised by the COVID-19", 11 June 2020 Joint Committee Submission

COVID 19 relief suggested re FAPI issues

The Guidance on international income tax issues raised by the COVID-19 crisis addresses whether COVID...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1) - Exempt Earnings - Paragraph (d) 115
Tax Topics - Treaties - Income Tax Conventions - Article 5 93
Tax Topics - Income Tax Act - Section 153 - Subsection 153(6) Impact of COVID travel restrictions on day count tests for qualifying non-resident employee status 67

Mark Coleman, Daniel A. Bellefontaine, "Forgiveness, Foreign Affiliates and FAPI: a Framework", Resource Sector Taxation (Federated Press), Vol. X, No. 1, 2015, p.694

Application of forgiven amount only to reduce losses (p. 697)

[O]ne of the main distinctions between the FAPI debt forgiveness regime and the...

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Mitchell Sherman, Kenneth Saddington, "100 1 Damnations!", Corporate Finance, Volume XVIII, No. 3, 2012, p. 2126, at 2129

"Now that the provision [s. 100(1)] applies to dispositions to non-residents, with which a CFA is almost certain to transact, FAPI implications...

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Gordon Funt, Joel A. Nitikman, "FAPI and Debt Forgiveness - Now You See It, Now You Don't", CCH Tax Topics, No. 1724, 24 March 2005.

Melanie Huynh, Eric Lockwood, "Foreign Accrual Property Income: A Practical Perspective", International Tax Planning, 2000 Canadian Tax Journal, Vol. 48, No. 3, p. 752.

A

Administrative Policy

5 June 2018 External T.I. 2017-0738081E5 - Interest exp of foreign affiliate holding company

The sole activities of FA1, a wholly-owned foreign affiliate of Canco, are to use money borrowed from an arm’s length bank to buy all the shares...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(f) Canco may choose not to deduct interest expense of a CFA so as not to generate a FAPL 406

31 July 2014 Internal T.I. 2014-0536581I7 - Foreign affiliate fresh start rules

An grandchild FA subsidiary of the taxpayer (FA2), which carried on both an investment business, generated royalties from licensing its IP (which...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Leasing Obligation licensed IP 68
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(B) licensed IP 101
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(k) fresh start rule applies even where the indirectly acquired subsidiary (FA2) carried on a passive IP licensing operation in the preceding year 637
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(f.1) deductions taken for whole year before carve-out under para. (f.1) 165

Paragraph (b)

Administrative Policy

5 October 2017 Internal T.I. 2015-0614021I7 - 214(16) deemed dividend

A portion of the interest paid by CanCo to ForCo, which is a controlled foreign affiliate of the Canadian parent of CanCo, is not deductible...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 214 - Subsection 214(16) Interest that is denied under the thin cap rules and recharacterized as dividends is still interest for FAPI and LRIP/GRIP purposes 202

27 June 2008 External T.I. 2007-0247551E5 - FAPI and Part XIII Tax

Two wholly-owned U.S.-resident subsidiaries of Canco (CFA1 and CFA2) carry on a U.S. active business through a U.S. general partnership (FP)...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 DRUPA partnership 38
Tax Topics - Income Tax Regulations - Regulation 5900 - Subsection 5900(3) partnership between 2 CFAs was a Cdn-resident person for s. 91(5) purposes 68
Tax Topics - Income Tax Act - Section 92 - Subsection 92(1) - Paragraph 92(1)(a) double ACB recognition of FAPI at partnership level and at level of Canco shareholder of CFA partners 230
Tax Topics - Income Tax Act - Section 91 - Subsection 91(5) s. 91(5) deduction eliminated net FAPI inclusion to CFA members of foreign partnership receiving foreign dividends from partnership subsidiary 107

C

Administrative Policy

23 August 2023 Internal T.I. 2021-0882371I7 - Dividend payment and 94.1(1)(g)

A wholly-owned non-resident subsidiary (“CFA”) of Canco owned 50% of the common shares of a non-resident corporation (“FA”) which were...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 94.1 - Subsection 94.1(1) - Paragraph 94.1(1)(g) there is no reduction under s. 94.1(1)(g) for dividends paid by the CFA/ consolidation provided of FAPI – C and s. 94.1(1)(g) language 317

Foreign Accrual Tax

Administrative Policy

2022 Ruling 2020-0859851R3 - Foreign accrual tax and underlying foreign tax

Transactions

Canco (a Canadian-resident subsidiary of a Canadian public company) wholly-owns a US corporation (FA1), which owns some of the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1.03) application of the underlying foreign tax rules to the investment of a CFA in a US private REIT through tiered US partnerships based on equity percentage in that REIT 420

11 June 2013 STEP Roundtable, 2013-0480321C6 - 2013 STEP Question 6 US LLCs - FAPI, FAT and FTCs

Is the US tax paid by a Canadian-resident taxpayer on the income (which also is foreign accrual property income) of an LLC which is owned by it...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 113 - Subsection 113(1) - Paragraph 113(1)(c) 176
Tax Topics - Income Tax Act - Section 20 - Subsection 20(12) deduction for US tax on LLC income which also is FAPI 161

5 September 2013 External T.I. 2011-0431031E5 - Guatemala's taxes

A Guatemalan-resdent foreign affiliate paid tax on gross revenue at a rate (for 2013) of 5% up to a low threshold (approx. Cdn. $3,925) and 6%...

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8 April 2004 Internal T.I. 2003-0037291I7 - US LLC and Regulation 5907(1.3)

A wholly-owned US C-corp subsidiary (US Holdco) of a taxable Canadian corporation wholly-owned two LLCs, which earned only foreign accrual...

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15 December 1998 External T.I. 9819355 - FOREIGN AFFILIATES - FOREIGN ACCRUAL TAX

Usco (100% owned by Canco) realized FAPI on the gain from the disposition in Year 1, of a partnership in which it has a 50% interest, of a rental...

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27 November 1998 External T.I. 9822835 - FOREIGN AFFILIATES - FOREIGN ACCRUAL TAX

USco1 paid US tax on its share of property income of US LLC (which is a partnership for Code purposes) for 1997. Its Canadian shareholder (Canco)...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Property Income 121
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1) - Underlying Foreign Tax - A - Subparagraph (iii) tax paid by C-Corp CFA regarding its share of LLC income is not added to its UFT until that income is dividended to it 143

29 October 1997 External T.I. 9719055 - FOREIGN ACCRUAL TAX

What is the "foreign accrual tax applicable" in the following scenario?

Income of Affiliate

Year 1

Year 2

Year 3

Total

Fapi...

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5 June 1996 External T.I. 9618035 - INCOME OR PROFITS TAX FOR FOREIGN AFFILIATE RULES

"'Income or profits tax' for the purpose of the definition 'foreign accrual tax' ... may include Canadian income tax paid by a foreign affiliate...

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3 September 1991 External T.I. 5-911182

The Department’s view was that the limit on the amount of FAT that can be claimed in respect of a taxable capital gain included in FAPI is the...

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3 September 1991 External T.I. 9111825 F - Foreign Pension Arrangements

In 1990, FA disposed of capital property giving rise to a $10,000 capital gain for ITA purposes and a gain for Code purposes of $20,000). After...

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84 C.R. - Q.57

A "personal holding company" special tax is a tax on retained earnings of a particular foreign affiliate and is not "income or profits tax".

Articles

Michael Black, "Cross-Border Consolidation and the Foreign Affiliate Rules", Canadian Tax Journal (2017) 65:1, 173-89

CCCTB proposal in European Commission draft EU directive package of October 2016 (pp.175-6)

[I]ncluded in that package is a proposal to revamp the...

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Mark Coleman, Daniel A. Bellefontaine, "Forgiveness, Foreign Affiliates and FAPI: a Framework", Resource Sector Taxation (Federated Press), Vol. X, No. 1, 2015, p.694

Whether foreign tax on forgiven amount can be FAT (p. 699)

[T]he definition of FAT requires that the relevant foreign income tax reasonably be...

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Mark Coleman, "Treaty Shopping and Back-to-Back Loan Rules", Power Point Presentation for 28 May 2015 IFA Conference in Calgary.

Non-Treaty Co makes a non-interest-bearing loan to its parent (Treaty Co) to fund an interest-bearing loan to the Canadian-resident parent of...

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Michael G. Bronstetter, Douglas R. Christie, "The Fickle Finger of FAT: An Analysis of Foeign Accrual Tax", Canadian Tax Journal, (2003) Vol 51, No. 3, p. 1317

[I]t can be difficult to envision how any foreign tax could be appliable to an amount incuded as a taxpayer's share of FAPI pursuant to subsection...

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Foreign Affiliate

Administrative Policy

3 November 2021 CTF Roundtable Q. 14, 2021-0911951C6 - Failure to properly file a T1135

The T1135 form and related disclosure stated that specified foreign property “does not include … a share of the capital stock or indebtedness...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 233.3 - Subsection 233.3(1) - Specified Foreign Property - Paragraph (k) CRA will entertain penalty and interest waiver where taxpayer was misled by Form as to the narrowness of FA exclusion 208

18 February 2013 External T.I. 2012-0467121E5 - Associated corporations, Debt Forgiveness

Husband and Wife own 51% and 49% of the shares of a non-resident corporation (ForeignCo) and 49% and 51% of the shares of CanadaCo. The two...

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15 July 2011 Internal T.I. 2010-0388621I7 - Entity Classification - Liechtenstein Anstalt

A Liechtenstein anstalt did not issue shares within the meaning of s. 248(1), as there was only one beneficiary. However, a division of the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Corporation anstalt a corp 98
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Share division of capital not necessary for "shares" 136

2004 Ruling 2004-0103111R3 - Foreign affiliates; indirect payment

Ruling that a U.S. LLC would be considered a corporation, that the ownership interest of a member would be considered shares, and that...

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5 October 2001 Comfort Letter 2001 1005B

Proposed amendment to deem for purposes of s. 95(2)(a) a non-resident corporation to be a foreign affiliate of a particular corporation resident...

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27 June 1994 External T.I. 9406005 - CORPORATE STATUS OF A DELAWARE LLC (4093-U5-100-4)

If a Delaware limited liability company is treated as a partnership rather than a corporation for purposes of the Internal Revenue Code, with the...

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16 December 1993 T.I. (C.T.O. "6363-1 Foreign Affiliate Deemed Active Business Income")

A Wyoming limited liability corporation that indirectly was owned 50% by each of two Canadian corporations dealing at arm's length with each other...

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93 C.M.TC - Q. 12

The limited liability companies for the two states that RC has reviewed (Wyoming and Florida) are considered to be corporations rather than...

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December 1992 B.C. Tax Executives Institute Round Table, Q.14 (October 1993 Access Letter, p. 482)

A foreign corporation is a foreign affiliate of a partnership of corporations, and not of the corporate partners.

88 C.R. - Q.11

A corporation resident in a listed country all of whose shares are "owned" by a partnership is not a foreign affiliate of a 30% partner, because...

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Foreign Bank

See Also

Loblaw Financial Holdings Inc. v. The Queen, 2018 TCC 182, rev'd on s. 95(1) - investment business - (a) (arm's length conduct) grounds 2020 FCA 79, in turn aff'd 2021 SCC 51

The Minster assessed the taxpayer on the basis that its Barbados subsidiary (GBL) had realized $473 million of foreign accrual property income...

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Words and Phrases
bank
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 165 - Subsection 165(1.11) requirement met where Crown knew the nature and quantum of the dispute 269
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Investment Business - Paragraph (a) Barbados-licensed international bank, which used Loblaw funding to invest responsively to Loblaw considerations, conducted an offside non-arm’s length business 429
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Investment Business - Paragraph (c) employee equivalents was reduced by employee time described in s. 95(2)(b) 290
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Foreign Exchange short-term debt securities were inventory because they were the raw material for generating swap income 130
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4.01) - Paragraph 152(4.01)(a) - Subparagraph 152(4.01)(a)(ii) GAAR is generally a separate matter rather than being subsumed in the allegedly-misused substantive provision 208
Tax Topics - Income Tax Act - Section 245 - Subsection 245(3) application of GAAR required the occurrence of an avoidance transaction (or series) in non-statute-barred years and the relevant previous year’s avoidance transaction did not occur as part of the series 512
Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) hiring of employees 15-years previously to engage foreign bank exception to investment business definition was not part of same series as renewal of foreign bank licence 228
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) use of Barbados sub to engage in proprietary trading for Canadian parent misused the foreign bank exemption, whose purpose was promoting international competitiveness 336
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(l) purpose of s. 95(2)(l) exception was to permit non-resident subsidiaries of Canadian banks and dealers to compete internationally 190

CIT Group Securities (Canada) Inc. v. The Queen, 2016 TCC 163, 2017 TCC 86

The question of whether an indirect Barbados subsidiary (“CCG”) of a Canadian company in the CIT group was earning property income and, thus,...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(l) - Subparagraph 95(2)(l)(iii) regulated Barbados subsidiary which invested in corporate debt qualified under the s. 95(2)(l) exclusion for foreign banks 767
Tax Topics - General Concepts - Evidence hearsay evidence could support expert opinion 122

Income from Property

Articles

John Lorito, Trevor O'Brien, "International Finance – Cash Pooling Arrangements", 2014 Conference Report, (Canadian Tax Foundation), 20:1-33

Cash risked in active business (p.20:24-25)

Interest earned by a foreign affiliate on cash/deposits risked in the active business of the foreign...

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Powrie, "The Potential for Realizing Foreign Accrual Property Income in Structuring Foreign Exploration and Development Ventures", International Tax Planning, Vol. VI, No. 1, p. 379

Includes a discussion of the distinction between income from an adventure or concern in the nature of trade, and income from an active business.

Investment Business

See Also

R&C Commrs v. Lockyer & Anor (for Pawson Estate), [2013] UKUT 050 (Tax and Chancery Chamber)

The deceased taxpayer and her three children held equal interests in a bungalow ("Fairhaven"), which they rented out as a holiday property. The...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Specified Investment Business actively-manged holiday property an investment 407

Indema Ltd. v. The Queen, 92 DTC 6244, [1992] 1 CTC 309 (FCTD)

The taxpayer was incorporated in 1972 in order to act as a distributor, but four years later its objects were extended and in 1978 it agreed to...

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Words and Phrases
principal business

Administrative Policy

2009 Ruling 2009-0308961R3 - Principal Purpose of Business

A CFA ("CFA1") which has been developing IP, manufacturing products for distribution by affiliates and employing more than five-full time...

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14 December 2008 Internal T.I. 2008-0299161I7 - five employees

When asked whether it would apply the finding in 489599 B.C. Ltd. v. The Queen, 2008 TCC 332, that the requirement for "more than five full time...

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26 October 2000 Internal T.I. 2000-004438

A controlled foreign affiliate of the taxpayer ("USCo") has several wholly-owned subsidiaries (Landcos) resident in the United States each of...

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24 August 1999 External T.I. 9701345 - FOREIGN AFFILIATES - DEEMED ACTIVE INCOME

Mr X, a Canadian-resident individual, owns all of FA1 which, in turn owns 100% of FA2. FAl carries on a US business of acquiring and developing...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(i) one development project held though subsidiary 197

1 December 1997 Tax Executives Institute Roundtable Q. IX 8M17870F

A bank as part of its investment banking activities purchases LP interests in limited partnerships that actively trade non-Candian debt and equity...

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13 November 1997 External T.I. 9722535 - FOREIGN AFFILIATES - INVESTMENT BUSINESS

In a situation where a foreign affiliate develops resource property and derives profits from the disposition of such resource properties once...

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10 November 1997 External T.I. 9711175 - FOREIGN AFFILIATES - INVESTMENT BUSINESS

An International Business Corporation incorporated in Barbados whose business consisted solely of marketing and the collection of receivables...

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10 November 1997 External T.I. 9722265 - FOREIGN AFFILIATES - INVESTMENT BUSINESS

If a commissionaire through whom a foreign affiliate did business was merely an agent, the foreign affiliate would be considered to be doing...

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22 September 1997 External T.I. 9641615 - INVESTMENT BUSINESS-TRADING IN COMMODITIES BY FA

Regarding a foreign affiliate of a Canadian corporation that was in the business of buying and selling natural gas and that hedged uncovered...

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26 July 1995 T.I. 950977 (C.T.O. "6363-1 Meaning of the Term "Regulated")

Where a foreign affiliate is licensed under the Barbadian Off-Shore Banking Act to carry on business activities defined under that Act as...

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14 July 1995 External T.I. 9509775 - 6363-1 FOREIGN AFFILIATES - INVESTMENT BUSINESS

The fact that a foreign affiliate receives funding to carry on its income earning activity by way of debt or equity from a related party would...

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28 June 1995 External T.I. 9505615 - 6363-1 FOREIGN AFFILIATES - INVESTMENT BUSINESS

In response to the question as to whether a particular foreign affiliate is able to include the services provided to it by its own employees in...

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6 December 1995 No. 9530400

CRA repeated the position set out in 6363-1 immediately below that:

a part-time employee who is employed in the active conduct of the affiliate's...

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1995 International Fiscal Association Conference, Q. 3 6363-1

In response to a question as to how Revenue Canada assesess whether a foreign affiliate employs more than five employees full time in the active...

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1995 Tax Executives Institute Round Table, Q. 13 No. 9530400

When an employee is employed directly by Company A under a 80% part-time employment contract and is also employed directly by Company B under a...

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31 October 1995 External T.I. 9526255 - FOREIGN AFFILIATES - EMPLOYEE EQUIVALENCY TEST

Two foreign affiliates (Aco and Bco) each carries on the business of real estate development and employ individuals in the active conduct of that...

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Articles

Tasso Lagios, Arda Minassian, "Foreign Accrual Property Income: Pitfalls for the Unwary", 1999 Conference Report, c. 3.

Jack Bernstein, "Canadian Taxation of Technology: Part II", Tax Profile, Vol. 5, No. 15, November 1997, p. 169

Discussion of utilization of international licensing companies.

Ahmed, "The Investment Business Definition", Canadian Current Tax, Vol. 6, No. 8, May 1996, p. 71.

Paragraph (a)

Cases

Canada v. Loblaw Financial Holdings Inc., 2021 SCC 51

The taxpayer, an indirect wholly-owned subsidiary of the Loblaw public company, wholly-owned a Barbados subsidiary (Glenhuron), that was licensed...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Business “business conducted,” as contrasted to “business,” did not include the raising of capital 229
Tax Topics - General Concepts - Foreign Law meaning of banking business under Barbados law was not persuasive 234
Tax Topics - Statutory Interpretation - Certainty full effect should be given to Parliament’s precise and unequivocal words to produce certainty 88
Tax Topics - Statutory Interpretation - Speaking in vain Parliament does not speak in vain 72
Tax Topics - Income Tax Act - Section 91 - Subsection 91(1) two policies balanced in FAPI regime 79
Tax Topics - Statutory Interpretation - Expressio Unius est Exclusio Alterius specific addition of a competition requirement in another provision implied that there was no such requirement here 152

Loblaw Financial Holdings Inc. v. Canada, 2020 FCA 79, aff'd 2021 SCC 51

The taxpayer, an indirect wholly-owned subsidiary of the Loblaw public company, wholly-owned a Barbados subsidiary (Glenhuron), that was licensed...

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Words and Phrases
banking
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Business receipt of equity funds from parent was not part of Barbados bank’s business 188
Tax Topics - Statutory Interpretation - Redundancy/reading in words error to apply an unexpressed intention 172
Tax Topics - Statutory Interpretation - Drafting Style no additional requirements should be inferred in legislation drafted with “mind-numbing detail” 172
Tax Topics - General Concepts - Separate Existence subsidiary did not manage its funds on behalf of parent 161
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Property Income fundamental purpose of FAPI is to capture passive income 164

See Also

Loblaw Financial Holdings Inc. v. The Queen, 2018 TCC 182, rev'd on s. 95(1) - investment business - (a) (arm's length conduct) grounds 2020 FCA 79, in turn aff'd 2021 SCC 51

The taxpayer, which was an indirect wholly-owned subsidiary of Loblaw Companies Limited (a Canadian public company) wholly-owned a Barbados...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 165 - Subsection 165(1.11) requirement met where Crown knew the nature and quantum of the dispute 269
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Bank CFA qualified as a foreign bank since it was licensed under Barbados law as an international bank 123
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Investment Business - Paragraph (c) employee equivalents was reduced by employee time described in s. 95(2)(b) 290
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Foreign Exchange short-term debt securities were inventory because they were the raw material for generating swap income 130
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4.01) - Paragraph 152(4.01)(a) - Subparagraph 152(4.01)(a)(ii) GAAR is generally a separate matter rather than being subsumed in the allegedly-misused substantive provision 208
Tax Topics - Income Tax Act - Section 245 - Subsection 245(3) application of GAAR required the occurrence of an avoidance transaction (or series) in non-statute-barred years and the relevant previous year’s avoidance transaction did not occur as part of the series 512
Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) hiring of employees 15-years previously to engage foreign bank exception to investment business definition was not part of same series as renewal of foreign bank licence 228
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) use of Barbados sub to engage in proprietary trading for Canadian parent misused the foreign bank exemption, whose purpose was promoting international competitiveness 336
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(l) purpose of s. 95(2)(l) exception was to permit non-resident subsidiaries of Canadian banks and dealers to compete internationally 190

Paragraph (c)

See Also

Loblaw Financial Holdings Inc. v. The Queen, 2018 TCC 182, rev'd on s. 95(1) - investment business - (a) (arm's length conduct) grounds 2020 FCA 79, in turn aff'd 2021 SCC 51

The taxpayer, which was an indirect wholly-owned subsidiary of Loblaw Companies Limited (a Canadian public company) wholly-owned a Barbados...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 165 - Subsection 165(1.11) requirement met where Crown knew the nature and quantum of the dispute 269
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Bank CFA qualified as a foreign bank since it was licensed under Barbados law as an international bank 123
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Investment Business - Paragraph (a) Barbados-licensed international bank, which used Loblaw funding to invest responsively to Loblaw considerations, conducted an offside non-arm’s length business 429
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Foreign Exchange short-term debt securities were inventory because they were the raw material for generating swap income 130
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4.01) - Paragraph 152(4.01)(a) - Subparagraph 152(4.01)(a)(ii) GAAR is generally a separate matter rather than being subsumed in the allegedly-misused substantive provision 208
Tax Topics - Income Tax Act - Section 245 - Subsection 245(3) application of GAAR required the occurrence of an avoidance transaction (or series) in non-statute-barred years and the relevant previous year’s avoidance transaction did not occur as part of the series 512
Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) hiring of employees 15-years previously to engage foreign bank exception to investment business definition was not part of same series as renewal of foreign bank licence 228
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) use of Barbados sub to engage in proprietary trading for Canadian parent misused the foreign bank exemption, whose purpose was promoting international competitiveness 336
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(l) purpose of s. 95(2)(l) exception was to permit non-resident subsidiaries of Canadian banks and dealers to compete internationally 190

Investment Property

See Also

Barejo Holdings ULC v. The Queen, 2015 DTC 1216 [at 1405], 2015 TCC 274, aff'd on other grounds 2016 FCA 304

An offshore fund ("SLT"), in which the taxpayer had an interest, invested in instruments (styled as "Notes") of non-resident subsidiaries of...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(11) - Investment Contract "notes" which tracked actively-managed reference pool of assets were "debt" 732
Tax Topics - Income Tax Act - Section 94.1 - Subsection 94.1(1) "notes" which tracked actively-managed reference pool of assets were "debt" and "indebtedness" 184
Tax Topics - Statutory Interpretation - Interpretation Act - Section 8.1 quaere whether there is a federal law of "debt" or "charity" 334

Leasing Obligation

Administrative Policy

31 July 2014 Internal T.I. 2014-0536581I7 - Foreign affiliate fresh start rules

Canco acquired a non-resident corporation (FA2) which was engaged in a non-Canadian business of licensing intellectual property to third parties...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(B) licensed IP 101
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(k) fresh start rule applies even where the indirectly acquired subsidiary (FA2) carried on a passive IP licensing operation in the preceding year 637
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Property Income - A pro rata allocation of expenses required between FAPI and deemed active business income 120
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(f.1) deductions taken for whole year before carve-out under para. (f.1) 165

Participating Percentage

Finance

16 May 2018 IFA Finance Roundtable, Q.8

Transfers under ss. 88(3) and 95(2)(c), (d.1) and (e) can be elected under para. (b) of the “relevant cost base” definition in s. 95(4) to...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(4) - Eligible Controlled Foreign Affiliate drafting deficiency in the relevant cost base rules where FAPI under $5,000 185

Taxation Year

Administrative Policy

2012 Ruling 2012-0449941R3 - 95(1) - taxation year

FA2 (which owns directly or indirectly all of the shares of the "AFAs" resident in "Foreign Country") is a controlled foreign affiliate and...

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28 January 2008 External T.I. 2005-0165131E5 - Taxation year of a foreign affiliate

The taxation year of a foreign affiliate, for FAPI and surplus account computation purposes, should generally, be the same as the taxation year...

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12 July 2000 External T.I. 2000-0036775 - Foreign Affiliates - "Taxation Year"

A change in the statutory and taxation year end (from December 31 to June 30) used by a foreign affiliate for corporate law and foreign taxation...

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1 February 1990 T.I. (July 1990 Access Letter, ¶1323)

In light of its specific wording, s. 95(1)(g) is not overridden by s. 249(4).

Trust Company

Administrative Policy

15 October 2001 External T.I. 2000-0037355 - Trust Company

An Alberta trust company that offers services to the public as executor, administrator, trustee, bailee etc. and is not authorized to carry on a...

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Paragraph 95(2)(a) (historical)

Administrative Policy

14 July 1995 External T.I. 9509775 - 6363-1 FOREIGN AFFILIATES - INVESTMENT BUSINESS

Where loans, which require very little attention once negotiated by a wholly-owned foreign affiliate (the "First Affiliate") which carries on the...

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24 May 1994 External T.I. 9406465 - 6363-1 FOREIGN AFFILIATE - DEEMED ACTIVE BUSINESS INCOME

Discussion of the implications of the 22 February 1994 Budget on the factual situation described below in 16 December 1993 T.I. 932563.

20 May 1993 T.I. (Tax Window, No. 31, p. 3, ¶2509)

Where funds are loaned by FA1 to FA2, which carries on business in the U.S. and, due to the application of the excess interest rule in s. 163(j)...

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93 C.M.TC - Q. 2

Discussion of treatment of interest paid by one U.S. foreign affiliate to another where only part of the interest paid is deductible under s....

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22 July 1991 T.I. (Tax Window, No. 5, p. 15, ¶1326)

Where an international shipping corporation charters a vessel on a bare boat basis from a related foreign affiliate that does not carry on an...

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84 C.R. - Q.56

The provisions of s. 95(2)(a)(ii) do not apply where, in certain foreign countries, rules for consolidation permit expenses of one member of the...

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80 C.R. - Q.36

An example of income ancillary to an active business is interest earned on working capital that is temporarily invested in short-term bank...

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Articles

Chapman, "Foreign Affiliate Amendments: Three Strikes and you are Done", 1995 Canadian Tax Journal, Vol. 43, No. 2, p. 433.

Subsection 95(2) - Determination of certain components of foreign accrual property income

Paragraph 95(2)(a)

Subparagraph 95(2)(a)(i)

Administrative Policy

2016 Ruling 2015-0604451R3 - 95(2)(a)(i)

Background

FA6, which is an indirect wholly-owned subsidiary of Canco, directly or indirectly holds eight other wholly-owned subsidiaries (the...

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2015 Ruling 2015-0573141R3 - Subparagraph 95(2)(a)(i)

Current structure

Canco (an indirect subsidiary of Parentco) holds the shares of FA4 (a U.S. corporation) through three stacked U.S. subsidiaries...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1) - Exempt Earnings - Paragraph (d) - Subparagraph (d)(ii) - Clause (d)(ii)(A) - Subclause (d)(ii)(A)(I) US sub, by servicing both its own debt portfolios and that of a U.S. sister, generated exempt earnings to the sister 144

30 September 2013 Internal T.I. 2012-0439661I7 - Income earmarked for future use & 95(2)(a)(i)

A CFA of Canco held funds generated from projects which were owned and operated by FA1, with the funds being "earmarked" for future investment in...

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Words and Phrases
directly related

16 May 2007 May 16, CLHIA Roundtable Q. 19, 2007-0229841C6 - Foreign affiliates - deemed active business income

FA1 enters into insurance or reinsurance contracts in the course of carrying on an active business outside Canada, and reinsures the risk...

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9 January 2001 External T.I. 1999-0011405 - foreign affiliates - deemed active

FA2 purchases at a discount long-term interest-bearing receivables of FA1 that were generated by sales made by FA1 in the course of its active...

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26 October 2000 Internal T.I. 2000-0044387 - Subsection 95(2)(a)(i)

A U.S. controlled foreign affiliate ("USco") of Canco provides management services to various wholly-owned subsidiaries ("Landcos") resident in...

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2 September 1999 External T.I. 9622545 - FOREIGN AFFILIATES - INVESTMENT BUSINESS

FA3 has six full time employees who provide geological and administrative services to FA1 and FA2, which are developing resource properties and...

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24 August 1999 External T.I. 9701345 - FOREIGN AFFILIATES - DEEMED ACTIVE INCOME

Mr X, a Canadian-resident individual, owns all of FA1 which, in turn owns 100% of FA2. FA1 carries on a US business of acquiring and developing...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Investment Business employees prorated based on how they spend their time 265

5 February 1997 External T.I. 9611725 - FOREIGN AFFILIATE - FACTORING BUSINESS

A foreign affiliate ("FA") factors receivables of only one client ("Manco"), a related foreign affiliate. The income of FA derived directly from...

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21 May 1996 External T.I. 9526865 - 95(2)(A) - DIRECTLY OR INDIRECTLY

Discussion of the application of the "directly or indirectly" test where a loan made by a foreign affiliate of Canco ("FA") to a related...

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16 August 1995 External T.I. 9521235 - 6363-1 DEEMED ACTIVE BUSINESS INCOME

S.95(2)(a)(i) would apply to interest income earned by a foreign affiliate of Canco from financing purchases by arm's length non-resident...

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16 December 1993 Income Tax Severed Letter 9325635 - Foreign Affiliate Deemed Active Business Income

Subparagraph 95(2)(a)(i) will apply to interest income received by a Wyoming limited liability company (that is 50% owned by two arm's length...

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Articles

Bruce Sinclair, "Current Topics in the Taxation of Real Estate Development", 2014 Conference Report, (Canadian Tax Foundation), 12:1-24.

Non-application of hypothetical income test where mother ship is subsidiary management LP (p. 12:21)

[C]lause (B)…does not have to be met where...

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Grant J. Russell, "'Mothership' Revisited - Canada's Foreign Affiliate Regime and Active Business Income", International Tax Planning, Vol. XV, No. 4, 2010, p. 1076

Criticizes the CRA position that the activities caried on by a management co. would represents a separate business rather than being assimilated...

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Paul C. Barnicke, Melanie Huynh, "Mother Ship in Foreign Affiliate's Partnership", 2009 Canadian Tax Highlights

Angelo Nikolakakis, "The Taxation of Foreign Affiliates in the Resource Sectors", 2008 Conference Report

Nikolakakis, "Foreign Exchange Fluctuations: Comprehensive Rules are Needed", Corporate Finance, Vol. V, No. 1, 1997, p. 342

Discussion of application of s. 95(2)(a) to the hedging by one foreign affiliate of an income stream received for another foreign affiliate...

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Subparagraph 95(2)(a)(ii)

Clause 95(2)(a)(ii)(B)

Administrative Policy

25 November 2021 CTF Roundtable Q. 15, 2021-0911921C6 - Curr Use & 95(2)(a)(ii)(B) & (D)

FA Finco, a foreign affiliate of Canadian Parent, lends money to FA Acquireco LLC (a US fiscally-transparent subsidiary of FA Holdco (which is a...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(D) - Subclause 95(2)(a)(ii)(D)(I) acquisition of shares that were not excluded property qualified under current use test 168
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(D) - Subclause 95(2)(a)(ii)(D)(III) in light of the current-use test, borrowed money used to acquire shares that were not excluded property could satisfy s. 95(2)(a)(ii)(D) 212

2 March 2017 External T.I. 2017-0682291E5 - Swedish/Finnish Profit Transfer Agreements

Many foreign jurisdictions, such as Germany, Sweden and Finland, have profit transfer agreement (“PTA”) mechanisms that allow for full or...

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22 June 2016 Internal T.I. 2016-0632821I7 F - 93(2.01) & Capital Contribution

A wholly-owned foreign affiliate (“Luxco1”) of Canco held 1/3 of the shares of a corporation ("NRco"), which was resident in a Treaty country...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 93 - Subsection 93(2.01) a contribution of FA1 shares to FA2 causes the FA2 shares to be substituted property for s. 93(2.01) purposes 195
Tax Topics - Income Tax Act - Section 248 - Subsection 248(5) ordinary meaning of “substituted” 125

26 May 2016 IFA Roundtable Q. 8, 2016-0642041C6 - s. 95(2)(a)(ii)(B) and borrowing to return capital

Where FA1 borrows $350,000 from a sister (FA3) to make a capital distribution to its Canadian shareholder (Canco) on its Class A common shares,...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(2) - Paragraph 5907(2)(j) interest used to fund return of capital that had been used in an active buisness deductible under Reg. 5907(2)(j) 219

26 May 2016 IFA Roundtable Q. 6, 2016-0642081C6 - German Organschafts

Under an “Organschaft,” a German parent (“Parentco”) and its German subsidiary (“Subco”) can enter into an agreement under which Subco...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 90 - Subsection 90(2) profit transfer payments by German sub to its German parent deemed to be dividends under s. 90(2) 319
Tax Topics - Income Tax Act - Section 53 - Subsection 53(1) - Paragraph 53(1)(c) German profit transfer payment to loss subsidiary is contribution of capital 158
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x) loss compensation payment under Organschaft 123

28 May 2015 IFA Roundtable Q. 11, 2015-0581571C6 - IFA 2015 Q11: Application of clause 95(2)(a)(ii)(B)

"Borrower FA," which exclusively carries on an active business, borrows money from "Lender FA" to pay a dividend in an amount not exceeding its...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(2) - Paragraph 5907(2)(j) interest on borrowing to distribute accumulated profits 172

31 July 2014 Internal T.I. 2014-0536581I7 - Foreign affiliate fresh start rules

Canco acquired a non-resident corporation (FA2) which was engaged in a non-Canadian business of licensing intellectual property to third parties...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Leasing Obligation licensed IP 68
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(k) fresh start rule applies even where the indirectly acquired subsidiary (FA2) carried on a passive IP licensing operation in the preceding year 637
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Property Income - A pro rata allocation of expenses required between FAPI and deemed active business income 120
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(f.1) deductions taken for whole year before carve-out under para. (f.1) 165

2002 Ruling 2001-0093903 - German Organschaft

Background

Canco, a Canadian public company, holds all the shares of a German Gesellschaft mit beschränkter Haftung (“FA Holdco”) which, in...

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29 June 2012 Internal T.I. 2012-0441601I7 - "directly or indirectly"

Luxco (a Lux subsidiary of Canco) makes an interest-bearing loan (Loan1) to Mereco (which is the non-resident parent of Canco and does not caary...

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2004 Ruling 2004-0103111R3 - Foreign affiliates; indirect payment

Ruling that s. 95(2)a)(ii)(B) would apply where a controlled French foreign affiliate made lease payments to a groupement d'intérêt économique...

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22 October 2002 Internal T.I. 2002-0149977 - Interest income deemed ABI of A CFA

Where Irishco (a foreign affiliate in which Canco has a qualified interest) lends at a market rate of interest to U.S. Holdco (a wholly-owned...

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5 September 2002 External T.I. 2000-00742

FA1 lends money to FA2 (a Swedish company) which uses the borrowed funds to acquire the shares of FA3 (another Swedish company) whose sole source...

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10 October 2000 External T.I. 2000-0050385 - Deemed active business income

A sub of Canco in Country B ("Finco") lends money to a wholly-owned subsidiary of Canco in Country A ("Holdco"). Holdco on-lends the money, at a...

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6 January 1999 External T.I. 9829785 - FOREIGN AFFILIATE-ACTIVE BUSINESS INCOME

Where a foreign subsidiary of Canco deposits a sum with a foreign bank to secure its guarantee of a loan made by the foreign bank to another...

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7 August 1996 External T.I. 9605735 - MEANING OF "DIRECTLY OR INDIRECTLY" IN 95(2)(A)

After being referred to an arrangement under which a foreign affiliate ("Forco"), which has made a loan to a related foreign subsidiary ("Xco"),...

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1 February 1996 External T.I. 9517445 - MEANING OF "DIRECTLY OR INDIRECTLY" IN 95(2)(A)

The words "directly or indirectly" in s. 95(2)(a)(ii)(B) "were meant to deal with back-to-back loans in certain fronting arrangements involving...

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21 June 1995 T.I. 951091

Where a corporation resident in Canada ("Canco") has a wholly-owned subsidiary that is resident in a designated treaty country ("FA"), and FA...

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25 April 1995 External T.I. 9429875 - 6363-1 FOREIGN AFFILIATES DEEMED ABI

Where one wholly-owned U.S. subsidiary ("B") of a Canadian corporation ("A") loans money on an interest-bearing basis to a second wholly-owned...

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Finance

16 May 2018 IFA Finance Roundtable, Q.6

Among the requirements for s. 95(2)(a)(ii) to deem interest paid by a foreign affiliate to be active business income is that the interest be...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(2) - Paragraph 5907(2)(j) interest denied under U.S. hybrid rule would be deductible 83

Articles

Ilia Korkh, Eivan Sulaiman, "Outbound Partnerships: FAPI in Unexpected Places", Canadian Tax Highlights, Vol. 27, No. 12, December 2019, p. 10

Interposition of partnership may engage s. 95(2)(a)(ii)(B) (p. 10)

[F]our arm’s-length Canadian corporations (Cancos) each own 25 percent of...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 91 - Subsection 91(1) 148

Jack Bernstein, Francesco Gucciardo, "Canada-U.S. Hybrid Financing – A Canadian Perspective on the U.S. Debt-Equity Regs", 26 September 2016, p. 1151

Recharacterization rules under Code s. 385 (p.1152)

Most fundamentally, the proposed regulations would automatically treat what would otherwise be...

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Ian Gamble, "Income from a Business or Property: General Principles and Current Issues", 2014 Conference Report, Canadian Tax Foundation, 5:1-32

CFA holding company can hold shares of CFA subs as an investment business (p. 5:19)

[A] top-tier holding affiliate in a foreign country may have...

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John Lorito, Trevor O'Brien, "International Finance – Cash Pooling Arrangements", 2014 Conference Report, (Canadian Tax Foundation), 20:1-33

Difficulties in establishing tracing in cash pool (p. 22)

It may be possible for interest earned by a foreign affiliate from deposits/loans made...

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Melanie Huynh, Eric Lockwood, "Foreign Accrual Property Income: A Practical Perspective", International Tax Planning, 2000 Canadian Tax Journal, Vol. 48, No. 3, p. 752.

Tasso Lagios, Arda Minassian, "Foreign Accrual Property Income: Pitfalls for the Unwary", 1999 Conference Report, c. 3.

Ahmed, "Selected Issues Relating to the 1995 Foreign Affiliate Amendments", International Tax Planning, 1997 Canadian Tax Journal, p. 2141.

Lanthier, Tobin, "Intercorporate Financing of Canadian Investment in the United States", Cross-Border Taxation Issues and Developments 1996, International Fiscal Association, p. 211.

Finance

Wallace G. Conway, "The New Foreign Affiliate Provisions: The Department of Finance's Perspective", 1995 Conference Report, c. 40, Q. 5

Discussion...

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Subclause 95(2)(a)(ii)(B)(II)

Administrative Policy

31 August 2017 Internal T.I. 2016-0680801I7 - Interpretation- subclause 95(2)(a)(ii)(B)(II) Act

A foreign corporation (“FP”) owns 100% of Canco, which wholly-owns two non-resident corporations (“FA1,” a Holdco, and “FALuxco”). FA1...

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Articles

Tina Korovilas, Drew Morier, "Non-Corporate Vehicles in the Foreign Affiliate Context", 2018 Conference Report (Canadian Tax Foundation), 20:1 – 114

Dubious textual interpretation of s. 95(2)(a)(ii)(B)(II) (“Cap B”) in 2016-0680801I7 (pp. 20:65-69)

The CRA recently considered the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 122
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) 111
Tax Topics - General Concepts - Ownership 245
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(11.2) - Paragraph 5907(11.2)(b) 181
Tax Topics - Income Tax Act - Section 90 - Subsection 90(1) 99
Tax Topics - Income Tax Act - Section 93.1 - Subsection 93.1(2) - Paragraph 93.1(2)(a) 120
Tax Topics - Income Tax Act - Section 93.1 - Subsection 93.1(2) - Paragraph 93.1(2)(d) - Subparagraph 93.1(2)(d)(i) 80
Tax Topics - Income Tax Regulations - Regulation 5901 - Subsection 5901(2) - Paragraph 5901(2)(b) 91
Tax Topics - Income Tax Act - Section 93 - Subsection 93(1.3) 168
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (e) 155
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (a) 368
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (c) 290
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(y) 64
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph. 95(2)(z) 332
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(D) 688
Tax Topics - Income Tax Act - Section 94 - Subsection 94(1) - Exempt Foreign Trust - Paragraph (h) - Subparagraph (h)(ii) - Clause (h)(ii)(C) 615

Nathan Boidman, Michael N. Kandev, "Expected Adverse Effects of Proposed U.S. Anti-Hybrid Regulations on Inbound Financing by Canadian MNEs", Tax Notes International, February 11, 2019, p. 623

Anti-hybrid rule in IRC s. 267A (p. 624)

The anti-hybrid rule in section 267A(a) simply states that the law will not allow a deduction for any...

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Clause 95(2)(a)(ii)(D)

Administrative Policy

27 January 2017 External T.I. 2013-0482351E5 - Clause 95(2)(a)(ii)(D)

Canco wholly-owns two controlled foreign affiliates (“FA Finco” and “FA Holdco”). Canco, FA Finco and FA Holdco have calendar year ends....

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(9.1) s. 18(9.1) applied where loan prepayment penalty was equal to PV of interest thereon 180
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(2.7) loan prepayment penalty fully deducted from surplus when paid 161

24 November CTF Annual Roundtable, Q.9

S. 95(2)(a)(ii)(D) may apply to deem interest payments received by FA #1 from FA #2 (the “Second Affiliate”) in a year on money borrowed by...

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28 May 2015 IFA Roundtable Q. 6, 2015-0581601C6 - IFA 2015 Q.6: Reversal of position on 95(2)(a)(ii)(D)

In 2013-0496841I7, CRA took the position that s. 95(2)(a)(ii)(D) did not apply to recharacterize interest on a debt ("Note 2") issued by FA2 to...

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21 October 2013 Internal T.I. 2013-0496841I7 - Application of clause 95(2)(a)(ii)(D) ITA

Following preliminary transactions, Canco held all the membership interest in a U.S. LLC (NR1) as well as 99.99% ownership of a [Netherlands?]...

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1 May 2009 CLHIA Roundtable Q. 12, 2009-0317191C6 - CLHIA Roundtable Question #12- 95(2)(a)(ii)(D)

Respecting a situation where Borrower and Subsidiary are resident in Country A and are liable to tax on a worldwide basis in Country B, CRA stated...

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5 September 2002 External T.I. 2000-00742

FA1 lends money to FA2 (a Swedish company) which uses the borrowed funds to acquire the shares of FA3 (another Swedish company) whose sole source...

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2002 Ruling 2002-0138993 - XXXXXXXXXX . - 95(2)(a)(ii)(D)

A foreign affiliate of the taxpayer ("Finco") in Country B makes a loan to a subsidiary of the taxpayer ("Holdco") in Country A. In connection...

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5 October 2001 Comfort Letter 20011005 (See also 20010917)

Finance is prepared to recommend an amendment to s. 95(2)(a)(ii)(D)(iv) to accommodate an affiliate "where the affiliate is not subject to income...

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1 November 2000 External T.I. 1999-0009725 - Foreign affiliates meaning of group

A wholly-owned subsidiary ("Subco B") of a U.S. operating corporation ("Opco") that was not resident in the United States and that was not part of...

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25 February 2000 External T.I. 99-000968

A wholly-owned foreign affiliate of Canco ("FA1") lends money to a wholly-owned U.K subsidiary of Canco (UK1) which, in turn, uses the borrowed...

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5 February 1997 External T.I. 9635625 - FOREIGN AFFILIATES - RELEVANT, LIABILITY FOR TAX

Respecting s. 95(2)(a)(ii)(D), RC found that "if an amount is deductible in computing income for income tax purposes, it would generally be...

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10 October 1996 T.I. 9630775

An amount paid by a foreign affiliate could be considered "relevant in computing the liability for income taxes" for purposes of s....

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Articles

Raj Juneja, Pierre Bourgeois, "International Tax Issues That Get in the Way of Doing Business", 2019 Conference Report (Canadian Tax Foundation), 36:1 – 42

CRA current use test

  • In 2002-0013899, concerning a taxpayer which carried on transactions to ensure that the conditions under s. 95(2)(a)(ii)(D)...

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Tina Korovilas, Drew Morier, "Non-Corporate Vehicles in the Foreign Affiliate Context", 2018 Conference Report (Canadian Tax Foundation), 20:1 – 114

Narrow scope of s. 93.1(4)(b)/same country residence requirement (pp. 20:75-76)

[I]t appears that the only function of paragraph 93.1(4)(b) is to...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 122
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) 111
Tax Topics - General Concepts - Ownership 245
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(11.2) - Paragraph 5907(11.2)(b) 181
Tax Topics - Income Tax Act - Section 90 - Subsection 90(1) 99
Tax Topics - Income Tax Act - Section 93.1 - Subsection 93.1(2) - Paragraph 93.1(2)(a) 120
Tax Topics - Income Tax Act - Section 93.1 - Subsection 93.1(2) - Paragraph 93.1(2)(d) - Subparagraph 93.1(2)(d)(i) 80
Tax Topics - Income Tax Regulations - Regulation 5901 - Subsection 5901(2) - Paragraph 5901(2)(b) 91
Tax Topics - Income Tax Act - Section 93 - Subsection 93(1.3) 168
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (e) 155
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (a) 368
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (c) 290
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(y) 64
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph. 95(2)(z) 332
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(B) - Subclause 95(2)(a)(ii)(B)(II) 169
Tax Topics - Income Tax Act - Section 94 - Subsection 94(1) - Exempt Foreign Trust - Paragraph (h) - Subparagraph (h)(ii) - Clause (h)(ii)(C) 615

Michael N. Kandev, "Putting on our Thinking Cap About 'CAP D'", International Tax (Wolters Kluwer CCH), June 2017, No. 94, p. 5

1st departure in s. 95(2)(a)(ii)(D) (”Cap D”) from general expansive thrust of s. 95(2)(a)(ii): importation of narrow s. 20(1)(c) terminology...

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Shawn D. Porter, David Bunn, "Is it Time to Simplify the Holding Company Rule?", International Tax Planning (Federated Press), Volume XIX, No. 2, 2014, p. 1304.

Broader thrust of s. 95(2)(a)(ii) (p. 1304)

[I]n general, the rules in subparagraph 95(2)(a)(ii) operate to preserve ABI characterization on...

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Paul Barnicke, Melanie Huynh, "TI Denies Cap D Rule", Canadian Tax Highlights, Volume 22, Number 2, February 2014, p. 12.

NR2 acquires Note1 (owing by grandchild) for Note2, and contributes Note1 to wholly-owned NR 3 (p. 12)

A recent TI (2013-0496841I7...) said that...

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Subclause 95(2)(a)(ii)(D)(I)

Administrative Policy

25 November 2021 CTF Roundtable Q. 15, 2021-0911921C6 - Curr Use & 95(2)(a)(ii)(B) & (D)

FA Finco (a foreign affiliate of Canadian Parent) lends to FA Holdco (a Delaware subsidiary of Canadian Parent), which uses the borrowed money to...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(B) application of current use test under s. 20(1)(c) 170
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(D) - Subclause 95(2)(a)(ii)(D)(III) in light of the current-use test, borrowed money used to acquire shares that were not excluded property could satisfy s. 95(2)(a)(ii)(D) 212

Subclause 95(2)(a)(ii)(D)(III)

Administrative Policy

25 November 2021 CTF Roundtable Q. 15, 2021-0911921C6 - Curr Use & 95(2)(a)(ii)(B) & (D)

FA Finco (a foreign affiliate of Canadian Parent) lends to FA Holdco (a Delaware subsidiary of Canadian Parent), which uses the borrowed money to...

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Subclause 95(2)(a)(ii)(D)(IV)

Sub-subclause 95(2)(a)(ii)(D)(IV)2

Administrative Policy

26 April 2017 IFA Roundtable Q. 7, 2017-0691221C6 - Clause 95(2)(a)(ii)(D)

S. 95(2)(a)(ii)(D)(IV)2 requires that, for each disregarded 2nd or 3rd affiliate and for each of their relevant taxation years that end in the...

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Words and Phrases
income

Paragraph 95(2)(a.1)

See Also

Agracity Ltd. v. The Queen, 2020 TCC 91

In the reply filed by the Crown to a related appeal of SaskCo, it pled that a Barbados subsidiary (NewAgco-Barbados) of SaskCo had bought a...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Sham confused books and records, where no intent to deceive, were not indicative of sham 574
Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(2) - Paragraph 247(2)(b) no evidence proffered that arm’s length parties would not have entered into non-resident goods seller/domestic servicing transactions 494
Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(2) - Paragraph 247(2)(a) fee earned by Canadian servicer fell within “rough, but … acceptable, range of what an arm’s length service provider might have enjoyed” 303
Tax Topics - General Concepts - Onus Hickman Motors followed, but same result under Sarmadi 331

Administrative Policy

14 May 2015 CLHIA Roundtable, 2015-0573801C6 - Foreign affiliates - sale of property to taxpayer

Canco carries on a life insurance business in Canada, and also through a foreign branch with clients in the foreign country. The income of FA,...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 138 - Subsection 138(2) exclusion where sale to foreign branch of Cdn insurer 214

Nelson Ong, "Sale of Property and Paragraph 95(2)(a.1)", 2012 Canadian Tax Journal, Vo. 60, No. 3, p. 679

Detailed discussion. S. 95(2)(a.1) does not contain a rule similar to s. 95(2)(b) that deems the income of a foreign affiliate to be FAPI if that...

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Tasso Lagios and Arda Minassian, "Foreign Accrual Property Income: Pitfalls for the Unwary", 1999 Conference Report, c. 3.

Jack, "The Foreign Affiliate Rules: The 1995 Amendments", 1995 Canadian Tax Journal, Vol. 43, No. 2, p. 347.

Arnold, "An Analysis of the 1994 Amendments to the FAPI and Foreign Affiliate Rules", 1994 Canadian Tax Journal, Vol. 42, No. 4, p. 993.

Subparagraph 95(2)(a.1)(iv)

Administrative Policy

25 October 2016 Internal T.I. 2016-0658241I7 - Application of 95(2)(a.1) to a capital gain

LLC, which is wholly-owned by Canco, sell an intangible to the ultimate Canadian parent of Canco, thereby giving rise to a capital gain. Could...

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Paragraph 95(2)(a.3)

Administrative Policy

21 May 1997 External T.I. 9707955 - FAPI - GROSS REVENUE

Gross revenue from indebtedness, the income from which would be excluded from fapi pursuant to s. 95(2.4), will nonetheless be taken into account...

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Paragraph 95(2)(b)

Administrative Policy

17 May 2022 IFA Roundtable Q. 3, 2022-0926191C6 - Meaning of "goods" under 95(3)(b)

CRA found that the s. 95(3)(b) exclusion was unavailable where the foreign subsidiary was providing marketing services to Canco respecting the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(3) - Paragraph 95(3)(b) condo inventory did not qualify as “goods” under s. 95(3)(b) 202

13 January 2014 External T.I. 2013-0474431E5 - Application of 95(2)(b)(ii)

In 2013-0474431E5 below, CRA indicated that if Canco seconds employees to its non-resident subsidiary (FA) for use in FA's services business with...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(b) seconding of employees to CFA 358

13 January 2014 External T.I. 2013-0474431E5 - Application of 95(2)(b)(ii)

underline;">: Facts. Foreign Affiliate, a wholly-owned subsidiary of Canco, which provides services to arm's length customers solely in the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(b) "full" reimbursement for seconded employee costs does not engage s. 95(2)(b)(ii) 170

12 November 2002 TEI Roundtable Q. 14, 2002-0173955 - Income From Services

S.95(2)(b) would apply where a Canadian subsidiary of a Canadian financial institution, which provides management services to pension funds but is...

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7 November T.I. 95-6331 [effect of Canadian manager on FA's billing rate]

A Co. ( a CCPC) employs approximately 6 to 8 full-time engineers including Mr. A (its 75% shareholder) in its business of providing engineering...

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Articles

Paul Dhesi, Korinna Fehrmann, "Integration Across Borders", Canadian Tax Journal, (2015) 63:4, 1049-72

Likely disadvantage of generating services income as FAPI (pp. 1055-6)

[C]onsider a Canadian company ("Canco") that sells its product directly to...

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Sandra Jack, "FAPI: The Goods on Goods", Canadian Tax Highlights, Vol. 9, No. 12, 27 December 2001.

Subparagraph 95(2)(b)(i)

Clause 95(2)(b)(i)(A)

Administrative Policy

1 February 2018 Internal T.I. 2016-0671921I7 - R&D Services - 95(2)(b) vs 247(2) & 95(3)(b), (d)

Four U.S.-resident controlled foreign affiliates of a Canadian public corporation (“Canco”), namely, CFA1 (wholly-owned by Canco), and CFA2,...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(3) - Paragraph 95(3)(d) R&D services of CFAs not part of M&P process 192
Tax Topics - Income Tax Act - Section 95 - Subsection 95(3) - Paragraph 95(3)(b) R&D services of CFAs not immediately related to the sale of goods by Canco 215
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1.3) - Paragraph 5907(1.3)(a) overview of FAT rules re consolidated US return with R&D credit 399

Clause 95(2)(b)(i)(B)

Articles

Joint Committee, "August 2022 legislative proposals relating to the Income Tax Act and the Income Tax Regulations", 16 February 2023 Joint Committee Submission

Failure of s. 95(2)(b)(i)(B) amendments to address a partnership structure (pp. 6-7)

  • The s. 95(2)(b)(i)(B) amendments address that, under current...

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Peter Lee, Paul Stepak, "PE Investments in Canadian Companies", draft 2017 CTF Annual Conference paper

Use of holding “Aggregator” LP to hold CFAs may generate FAPI (pp. 9-10)

The potential FAPI issue arises from the fact that the income of the...

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Subclause 95(2)(b)(i)(B)(I)

Finance

23 December 2016 Comfort Letter re s. 95(2)(b) base erosion rule

[Proposed extension of s. 95(2)(a)(ii)(D) safe harbor to inter-FA fees that are...

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Paragraph 95(2)(c)

Administrative Policy

2016 Ruling 2015-0571441R3 - Dutch Cooperative - 93.2 & 95(2)(c)

Current structure

Forco 1 is held through three stacked Canadian partnerships by two taxable Canadian corporations (Canco 1D and Canco 1A) which,...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Corporation Dutch cooperative whose articles limited member liability was a corp 263
Tax Topics - Income Tax Act - Section 93.2 - Subsection 93.2(2) membership interest in Dutch cooperative ruled to be shares 92
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Controlled Foreign Affiliate non-resident subsidiaries CFAs of bottom-tier Cdn partnership and FAs of Canadian corporate partners 130
Tax Topics - Income Tax Act - Section 85.1 - Subsection 85.1(3) joint contribution of shares of FA to Netherlands co-op in consideration for credits to their respective membership accounts deemed to be for share consideration 57

26 May 2016 IFA Roundtable Q. 10, 2016-0642101C6 - 93.2 & 95(2)(c)

FA1 (wholly-owned by Canco) transfers all of the shares of FA2 to another non-resident subsidiary of FA1, viz., a non-share corporation...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 93.2 - Subsection 93.2(3) s. 95(2)(c) rollover can apply on a dropdown of shares made to an LLC as a contribution of capital rather than for “share” consideration 278
Tax Topics - Income Tax Act - Section 85.1 - Subsection 85.1(3) drop-down of FA shares to non-share FA deemed to be for share consideration 129

Articles

Schwartz, "Tax-Free Reorganizations of Foreign Affiliates", 1984 Canadian Tax Journal, November-December 1984, p. 1039.

Paragraph 95(2)(c.1)

Articles

Firoz Ahmed, Patrick Marley, "Proposed Amendments to Foreign Affiliate Rules", Canadian Current Tax, Vol. 14, No. 8, May 2004, p. 81.

Paragraph 95(2)(d.1)

Articles

Geoffrey S. Turner, "June 2014 Election Deadlines for Retroactive Application of New Foreign Affiliate Reorganization Rules", CCH International Tax, No. 74, February 2014, p. 1.

2011 broadening (p. 4)

The new foreign affiliate merger rollover in paragraph 95(2)(d.1) has been amended, among other things, to eliminate the...

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Patrick Marley, "Foreign Affiliate Mergers and Liquidations - Navigating Proposed Changes", Canadian Current Tax, Vol. 16, No. 12, September 2006, p. 125.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 88 - Subsection 88(3) 0

Paragraph 95(2)(e)

Administrative Policy

26 January 2018 Internal T.I. 2017-0735771I7 - Application of paragraph 40(3.5)(c)

Canco realized a suspended loss when it contributed its shares of a controlled foreign affiliate (CCo) to another CFA (BCo). CRA found that such...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.5) - Paragraph 40(3.5)(c) - Subparagraph 40(3.5)(c)(i) a suspended loss on the sale of CFA1 to CFA2 was not de-suspended on s. 95(2)(e) wind-up of CFA1 into CFA2 478
Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.5) - Paragraph 40(3.5)(b) scope of s. 40(3.5)(b) extends to mergers and constructive formation of new entities 443

24 March 2004 External T.I. 2003-0034311E5 - "liquidation and a dissolution": What does it mean

The Agency was advised that under the corporate law of the Czech Republic, there was a distinction between a wind-up with liquidation of a...

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Words and Phrases
liquidation
Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Provincial Law 70
Tax Topics - General Concepts - Foreign Law Czech liquidation procedure compared to Canadian winding-up procedures 110

Articles

Geoffrey S. Turner, "June 2014 Election Deadlines for Retroactive Application of New Foreign Affiliate Reorganization Rules", CCH International Tax, No. 74, February 2014, p. 1.

2011 introduction of DLAD (p. 4)

New paragraph 95(2)(e) replaces the "90% surplus entitlement percentage" and "foreign non-recognition" conditions...

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Philippe Montillaud, Grant J. Russell, "Foreign Accrual Tax and Flow-through Entities", International Tax Planning, Volume XVIII, No. 4, 2013, p. 1280

Application of s. 93(2.01) stop-loss rule to DLAD capital loss (p. 1282)

Regulation 5907(5) requires that capital gains and losses for surplus...

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Paul L. Barnicke, Melanie Huynh, "FA Proposals prompt History Revisit", Canadian Tax Highlights, October 2011.

Schwartz, "Tax-Free Reorganizations of Foreign Affiliates", 1984 Canadian Tax Journal, November-December 1984, p. 1039.

Subparagraph 95(2)(e)(v)

Clause 95(2)(e)(v)(A)

Subclause 95(2)(e)(v)(A)(III)

Administrative Policy

29 July 2020 Internal T.I. 2020-0852071I7 - Clarification of views noted in 2019-0793481I7

A Canadian corporation (ACo) realized a suspended loss when it contributed its shares (i.e., in a drop-down to which s. 85.1(3) did not apply) of...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.5) - Paragraph 40(3.5)(c) - Subparagraph 40(3.5)(c)(i) DLAD winding-up of FA referenced in s. 40(3.5)(c)(i) caused it to apply to FA parent successor 334

Paragraph 95(2)(e.1)

Administrative Policy

24 November 1999 External T.I. 9912965 - FOREIGN AFFILIATES - CROSS BORDER LIQUIDATION

Where the disposing affiliate is resident in a different country than the liquidating affiliate, the exception only applies where gain or loss is...

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15 December 1997 External T.I. 9707715 - LIQUIDATION OF A FOREIGN AFFILIATE

S.95(2)(e.1) would apply to the dissolution of a U.S. foreign affiliate into another wholly-owned U.S. foreign affiliate if the transaction...

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Paragraph 95(2)(f)

Administrative Policy

5 June 2018 External T.I. 2017-0738081E5 - Interest exp of foreign affiliate holding company

FA1 which is wholly-owned by Canco is formed to acquire all the shares of FA2 (which carries on an active business in a designated treaty country)...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Property Income - A deduction of interest in computing FAPI is discretionary 162

21 November 2017 CTF Roundtable Q. 15, 2017-0724091C6 - Conversion from a US LP to an LLC

Where a U.S. limited partnership (USLP) is converted into a U.S. limited liability company (LLC), CRA has commented that the USLP is considered to...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) conversion from LP to LLC a disposition 47

26 April 2017 IFA Roundtable Q. 2, 2017-0691191C6 - Subsection 247(2) and FAPI

CRA considers that the s. 247(2) rules apply to transfer pricing between a controlled foreign affiliate and non-resident non-arm’s length...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(2) s. 247(2) not applied to a CFA earning FAPI if the transaction has been vetted under foreign OECD-based transfer pricing rules 118

3 December 2003 External T.I. 2003-0051205 - Determination of FAPI Repayment of debt

An operating grandchild subsidiary of Canco in the United States ("FA2") pays off a third-party U.S.-dollar borrowing the initial proceeds of...

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16 August 2000 External T.I. 1999-0009615 - Paragraphs 95(2)(f) and (g)

Where a US foreign affiliate lends Deutschemarks to a German foreign affiliate, the appropriate currency to use for the purposes of determining...

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92 C.M.TC - Q.7

Where a particular currency has become generally accepted for conducting business in a country, its use will be considered reasonable in the...

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88 C.R. - Q.13

If at the time Canco acquired FA1 for $100 which in turn owned FA2, the shares of FA2 had a fair market value of $100 and a basis of $1, and the...

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Articles

Geoffrey S. Turner, "The Reconsidered 95(2)(f), (f.1) and (f.2) Foreign Affiliate Income Computation in Calculating Currency Proposals", International Tax, CCH, December 2007, No. 37, p. 11.

Paragraph 95(2)(f.1)

Administrative Policy

31 July 2014 Internal T.I. 2014-0536581I7 - Foreign affiliate fresh start rules

An grandchild FA subsidiary of the taxpayer (FA2), which carried on both an investment business, generated royalties from licensing its IP (which...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Leasing Obligation licensed IP 68
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(B) licensed IP 101
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(k) fresh start rule applies even where the indirectly acquired subsidiary (FA2) carried on a passive IP licensing operation in the preceding year 637
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Property Income - A pro rata allocation of expenses required between FAPI and deemed active business income 120

Articles

Geoffrey S. Turner, "The New 95(2)(f.1) Carve-out Rule – Election Deadline Approaching", International Tax, CCH, 7 January 2010, No. 1974, p. 1.

"In some respects, the new "designated acquired corporation" feature of the paragraph 95(2)(f.1) carve-out rule can be conceptualized as a tax...

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Shawn D. Porter, Sandra J. Slaats, "The CARP Rule and Proposed Paragraph 95(2)(f.1)", International Tax Planning, 2009, p. 1024.

Geoffrey S. Turner, "The Reconsidered 95(2)(f), (f.1) and (f.2) Foreign Affiliate Income Computation in Calculating Currency Proposals", International Tax, CCH, December 2007, No. 37, p. 11.

Paragraph 95(2)(f.11)

Subparagraph 95(2)(f.11)(ii)

Clause 95(2)(f.11)(ii)(A)

Articles

Joint Committee, "Summary of Issues Raised with the Department of Finance in Respect of the Excessive Interest and Financing Expenses Limitation (EIFEL) Proposals", 22 March 2023 Joint Committee letter

Interpretive difficulties re lower-tier LP structures (p. 17)

  • It is unclear how the EIFEL rules apply where a partnership (“LP”) is...

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EY, "Revised EIFEL proposals", Tax Alert 2022 No. 43, 10 November 2022

IFE of CFA not restricted (p. 4)

  • Per s. 95(2)(f.11)(ii)(A), the EIFEL rules should not restrict the IFE of the CFA for the purposes of...

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Clause 95(2)(f.11)(ii)(D)

Articles

Nat Boidman, Eivan Sulaiman, "The EIFEL Proposals and Controlled Foreign Affiliates", Vol. 2, No. 1, February 2023, p. 5

Base example of consolidated percentage EIFEL denial to CFA and Canco (p. 6)

  • Canco, which has business income of $1,100 after deducting interest...

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EY, "Revised EIFEL proposals", Tax Alert 2022 No. 43, 10 November 2022

No carryforward (pp. 4-5)

  • Per s. 95(2)(f.11)(ii)(D), where a portion of a taxpayer’s IFE for a taxation year is denied under s. 18.2(2), the...

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Paragraph 95(2)(f.14)

Administrative Policy

27 March 2018 Internal T.I. 2015-0592551I7 - Excluded property status of partnership interest

An Iceland “Sameignarfelag” (viewed by CRA as a partnership), which had been serving as a Finco to foreign affiliates in a Canadian...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property partnership interests no longer were excluded property on dissolution given prior disposition of s. 95(2)(a)(ii) loans 551
Tax Topics - Income Tax Regulations - Regulation 5908 - Subsection 5908(10) partnership interests no longer were excluded property on dissolution given prior disposition of s. 95(2)(a)(ii) loans/potential qualification of partnership interest under para. (c) ignored 297
Tax Topics - Income Tax Regulations - Regulation 5903 - Subsection 5903(5) - Paragraph 5903(5)(b) foreign affiliate parent cannot carry back FAPLs generated by wound-up foreign affiliate 389
Tax Topics - Income Tax Act - Section 96 Icelandic Sameignarfelag was partnership 198
Tax Topics - Income Tax Act - Section 98 - Subsection 98(2) partnership interest disposition occurred no sooner than final distribution date 79

9 July 2015 External T.I. 2013-0475421E5 - Section 94.2

An exempt foreign trust (the "Trust") is deemed by s. 94.2(2) to be a non-resident corporation controlled by (and therefore a CFA of) a...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 220 - Subsection 220(2.1) potential relief from penalties where insufficient data for computing FAPI 191
Tax Topics - Income Tax Act - Section 233.5 potential relief from penalties where insufficient data for computing FAPI 195
Tax Topics - Income Tax Act - Section 94.2 - Subsection 94.2(2) deemed CFA unit trust sub of a FI subject to mark-to-market rules 178

Paragraph 95(2)(g)

Administrative Policy

16 August 2000 External T.I. 1999-0009615 - Paragraphs 95(2)(f) and (g)

Where a US foreign affiliate had lent money to a German foreign affiliate that was denominated in Canadian dollars, a foreign currency loss...

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Articles

Nikolakakis, "Foreign Exchange Fluctuations: Comprehensive Rules are Needed", Corporate Finance, Vol. V, No. 1, 1997, p. 342

Discussion of how the foreign affiliate rules interfere with legitimate hedging transactions.

Paragraph 95(2)(g.1)

Administrative Policy

30 August 2004 External T.I. 2003-000135

The only significant asset of FA2 is a loan receivable of $100 owing by its parent, FA1, which is a wholly-owned foreign affiliate of Canco. The...

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5 December 2003 External T.I. 2002-0165195 - Debt Forgiveness in Foreign Affiliates

If a portion of the debt of a controlled foreign affiliate has been used to earn FAPI, and the remainder to earn active business income, the whole...

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Articles

Marc André Gaudreau Duval, Michael N. Kandev, "Foreign Affiliate Issues in Troubled Times", International Tax (Wolters Kluwer CCH), No. 112, June 2020, p. 1

S. 95(2)(g.1) applies on the basis of whether interest would be deductible from FAPI (pp. 2-3)

2002-0165195 … (the "2002 Technical") …...

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Mark Coleman, Daniel A. Bellefontaine, "Forgiveness, Foreign Affiliates and FAPI: a Framework", Resource Sector Taxation (Federated Press), Vol. X, No. 1, 2015, p.694

Loans subject to s. 95(2)(a)(ii)(B) or (D) not commercial debt obligations (p. 695)

[I]f interest on a loan owing by a debtor affiliate to another...

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Gordon Funt, Joel A. Nitikman, "FAPI and Debt Forgiveness - Now You See It, Now You Don't", CCH Tax Topics, No. 1724, 24 March 2005.

Melanie Huynh, Eric Lockwood, "Foreign Accrual Property Income: A Practical Perspective", International Tax Planning, 2000 Canadian Tax Journal, Vol. 48, No. 3, p. 752.

Paragraph 95(2)(i)

Administrative Policy

28 May 2015 IFA Roundtable Q. 9, 2015-0581581C6 - IFA 2015 Q.9: 95(2)(i): "proceeds"

A controlled foreign affiliate acquires a building, for continuous use in its active business, from a third party by issuing a note (or assuming...

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27 April 2015 Internal T.I. 2014-0546641I7 - Foreign exchange on a debt arising on reduction of capital

A U.S.-dollar denominated debt (the "Liability") owing by a Hungarian corporation ("FA") to its Canadian parent (the "Taxpayer") arose as a result...

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22 May 2014 May IFA Roundtable, 2014-0526771C6 - Application of paragraph 95(2)(i)

underline;">: Q.4(a). Would earning interest on borrowed money for a short period after the borrowing and before it can be employed to acquire...

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2012 Ruling 2010-0386201R3 - Tower structure capitalized by interest-free loans

Existing structure

Canco, which is a privately-owned taxable Canadian corporation, holds a US limited liability limited partnership ("LLLP")...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(g) - Subparagraph 40(2)(g)(ii) unwinding of tower where LLC and ULC funded with non-interest bearing U.S. dollar loans - Byram applied 894

30 March 1988 T.I. 95-5293 [proceeds of sale must be applied with due dispatch]

After a foreign affiliate incurred a liability and used the proceeds to acquire an excluded property, it disposed of the property and deposited...

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Paragraph 95(2)(k)

Administrative Policy

5 November 2015 Internal T.I. 2015-0585381I7 - Paragraph 95(2)(k) - Fresh Start Rules

2014-0536581I7 found that the fresh start rule can apply to bump the tax basis of the assets of a foreign corporation which is acquired by Canco...

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31 July 2014 Internal T.I. 2014-0536581I7 - Foreign affiliate fresh start rules

Canco acquired the shares of FA1 (which carried on an active business and held FA2) from an arm's length vendor. FA2, in turn, held FA3 as well...

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6 January 2000 External T.I. 9908735 - FRESH START RULES UNDER 95(2)(K)

CRA noted that the then current version of the s. 95(2)(k) rules:

do not apply for the purpose of computing a capital gain or loss, as that would...

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Articles

Grant Russell, Philippe Montillaud, "'Fresh Start' Rules – on Becoming an Affiliate", , International Tax Planning (Federated Press), Vol. XX, No.2, 2015, p. 1392

Stub period income inclusion under s. 95(2)(k.1)(i) (pp. 1392-3)

[A] passive business [in this article] is an "investment business" and a...

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Paul Barnicke, Melanie Huynh, "Fresh-Start FA Rules", Canadian Tax Highlights, Vol. 22, No., 12, December 2014, p. 7.

Application of fresh start rule on acquisition of FA carrying on an investment business where carve-out rule otherwise would have applied (p....

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Jerry Mahnger, Susan McKilligan, "The Foreign Affiliate Fresh Start Rules", 2009 Canadian Tax Journal, No. 2

Discussion of s. 95(2)(k) to 95(2)(k.6) including detailed examples.

Melanie Huynh, Eric Lockwood, "Foreign Accrual Property Income: A Practical Perspective", International Tax Planning, 2000 Canadian Tax Journal, Vol. 48, No. 3, p. 752.

Atlas, "Transitional Issues still Cloud Application of New Fapi Rules", Tax Topics, May 8, 1997, No. 1313, p. 1

Because s. 95(2)(k) is limited to the computation of income rather than capital gains, it does not have the effect of grandfathering gains that...

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Paragraph 95(2)(l)

See Also

Loblaw Financial Holdings Inc. v. The Queen, 2018 TCC 182, rev'd on s. 95(1) - investment business - (a) (arm's length conduct) grounds 2020 FCA 79, in turn aff'd 2021 SCC 51

C Miller J found that the use by the taxpayer of a Barbados subsidiary (GBL), that was licensed in Barbados as an international bank, to engage in...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 165 - Subsection 165(1.11) requirement met where Crown knew the nature and quantum of the dispute 269
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Bank CFA qualified as a foreign bank since it was licensed under Barbados law as an international bank 123
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Investment Business - Paragraph (a) Barbados-licensed international bank, which used Loblaw funding to invest responsively to Loblaw considerations, conducted an offside non-arm’s length business 429
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Investment Business - Paragraph (c) employee equivalents was reduced by employee time described in s. 95(2)(b) 290
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Foreign Exchange short-term debt securities were inventory because they were the raw material for generating swap income 130
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4.01) - Paragraph 152(4.01)(a) - Subparagraph 152(4.01)(a)(ii) GAAR is generally a separate matter rather than being subsumed in the allegedly-misused substantive provision 208
Tax Topics - Income Tax Act - Section 245 - Subsection 245(3) application of GAAR required the occurrence of an avoidance transaction (or series) in non-statute-barred years and the relevant previous year’s avoidance transaction did not occur as part of the series 512
Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) hiring of employees 15-years previously to engage foreign bank exception to investment business definition was not part of same series as renewal of foreign bank licence 228
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) use of Barbados sub to engage in proprietary trading for Canadian parent misused the foreign bank exemption, whose purpose was promoting international competitiveness 336

Articles

Chapman, "Foreign Affiliate Amendments: Three Strikes and you are Done", 1995 Canadian Tax Journal, Vol. 43, No. 2, p. 433.

Jack, "The Foreign Affiliate Rules: The 1995 Amendments", 1995 Canadian Tax Journal, Vol. 43, No. 2, p. 347

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(6) 6

Finance

Jayme Yeung, , 'Trading or Dealing in Indebtedness Offshore: Paragraph 95(2)(l) Revisited", 2011 Canadian Tax Journal, Vol 59, p. 843

General...

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Subparagraph 95(2)(l)(iii)

See Also

CIT Group Securities (Canada) Inc. v. The Queen, 2016 TCC 163, 2017 TCC 86

The taxpayer held a Barbados subsidiary (“CCG”) through nine (mostly wholly-owned) Barbados international business corporations (the...

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Words and Phrases
financial service
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Bank no requirement to be regulated as a bank 243
Tax Topics - General Concepts - Evidence hearsay evidence could support expert opinion 122

Paragraph 95(2)(m)

Administrative Policy

12 July 2013 External T.I. 2011-0415911E5 - FA held through partnership -– 95(2)(m) & 95(2)(y)

Canco has a 51% interest in a partnership ("Partnership") holding all the shares of Forco1 which, in turn, owns all the shares of Forco2. Forco1...

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Paragraph 95(2)(n)

Articles

Angelo Nikolakakis, "Lehigh Cement Limited v. The Queen – A Bridge Too FAAAR", International Tax Planning, Volume XIX, No. 1, 2013, p. 1284

In the course of a submission that it was contrary to the scheme of the Act to apply s. 95(6)(b) to attack indirect loans to a non-resident...

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Paragraph 95(2)(y)

Articles

Tina Korovilas, Drew Morier, "Non-Corporate Vehicles in the Foreign Affiliate Context", 2018 Conference Report (Canadian Tax Foundation), 20:1 – 114

S. 95(2)(y) does not preclude FA also being FA of partnership (p. 20:61)

The CRA has confirmed that the attribution of share ownership from the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 122
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) 111
Tax Topics - General Concepts - Ownership 245
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(11.2) - Paragraph 5907(11.2)(b) 181
Tax Topics - Income Tax Act - Section 90 - Subsection 90(1) 99
Tax Topics - Income Tax Act - Section 93.1 - Subsection 93.1(2) - Paragraph 93.1(2)(a) 120
Tax Topics - Income Tax Act - Section 93.1 - Subsection 93.1(2) - Paragraph 93.1(2)(d) - Subparagraph 93.1(2)(d)(i) 80
Tax Topics - Income Tax Regulations - Regulation 5901 - Subsection 5901(2) - Paragraph 5901(2)(b) 91
Tax Topics - Income Tax Act - Section 93 - Subsection 93(1.3) 168
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (e) 155
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (a) 368
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (c) 290
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph. 95(2)(z) 332
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(B) - Subclause 95(2)(a)(ii)(B)(II) 169
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(D) 688
Tax Topics - Income Tax Act - Section 94 - Subsection 94(1) - Exempt Foreign Trust - Paragraph (h) - Subparagraph (h)(ii) - Clause (h)(ii)(C) 615

Paragraph. 95(2)(z)

Articles

Tina Korovilas, Drew Morier, "Non-Corporate Vehicles in the Foreign Affiliate Context", 2018 Conference Report (Canadian Tax Foundation), 20:1 – 114

Example of curative effect of s. 95(2)(z) (pp. 20:63-64)

In this example, Inactive FA earns interest income from Active FA. The recharacterization...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 122
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) 111
Tax Topics - General Concepts - Ownership 245
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(11.2) - Paragraph 5907(11.2)(b) 181
Tax Topics - Income Tax Act - Section 90 - Subsection 90(1) 99
Tax Topics - Income Tax Act - Section 93.1 - Subsection 93.1(2) - Paragraph 93.1(2)(a) 120
Tax Topics - Income Tax Act - Section 93.1 - Subsection 93.1(2) - Paragraph 93.1(2)(d) - Subparagraph 93.1(2)(d)(i) 80
Tax Topics - Income Tax Regulations - Regulation 5901 - Subsection 5901(2) - Paragraph 5901(2)(b) 91
Tax Topics - Income Tax Act - Section 93 - Subsection 93(1.3) 168
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (e) 155
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (a) 368
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property - Paragraph (c) 290
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(y) 64
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(B) - Subclause 95(2)(a)(ii)(B)(II) 169
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(D) 688
Tax Topics - Income Tax Act - Section 94 - Subsection 94(1) - Exempt Foreign Trust - Paragraph (h) - Subparagraph (h)(ii) - Clause (h)(ii)(C) 615

Subsection 95(2.5) - Definitions for paragraph (2)(a.3)

Excluded Income

Administrative Policy

Edward A. Heakes, "Another Wave of Foreign Affiliate Proposals", International Tax Planning, Volume XVIII, No. 4, 2013, p. 1275

Narrowing of excluded income/revenue (p.1278)

"Excluded income" and "excluded revenue" are both defined in subsection 95(2.5). The July 12...

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Indebtedness

Administrative Policy

Specified Deposit

Administrative Policy

5 July 1995 External T.I. 9514785 - 6363-1 FOREIGN AFFILIATES - SPECIFIED DEPOSIT

A deposit made by a foreign affiliate will qualify as a specified deposit if the foreign affiliate does not carry on an active business, even if...

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Subsection 95(3)

Administrative Policy

14 September 2001 Comfort Letter

In light of the principle that there is no erosion of the tax base or diversion of income from Canada if the services in question are required by...

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26 June 1991 T.I. (Tax Window, No. 4, p. 4, ¶1318)

Discussion of what constitutes "Canadian risk".

Paragraph 95(3)(b)

Administrative Policy

17 May 2022 IFA Roundtable Q. 3, 2022-0926191C6 - Meaning of "goods" under 95(3)(b)

A wholly-owned foreign affiliate (“FA”) of a corporation resident in Canada (“Canco”) provides marketing services for FMV fees to Canco...

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Words and Phrases
goods
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(b) s. 95(3)(b) exclusion unavailable where foreign sub’s services were the marketing of condo sales by Canco 49

1 February 2018 Internal T.I. 2016-0671921I7 - R&D Services - 95(2)(b) vs 247(2) & 95(3)(b), (d)

Four U.S.-resident controlled foreign affiliates of a Canadian public corporation (“Canco”), namely, CFA1 (wholly-owned by Canco), and CFA2,...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(b) - Subparagraph 95(2)(b)(i) - Clause 95(2)(b)(i)(A) provision of services for fee by CFA to Canco on arm’s length terms did not oust s. 95(2)(b)(i)(A) 173
Tax Topics - Income Tax Act - Section 95 - Subsection 95(3) - Paragraph 95(3)(d) R&D services of CFAs not part of M&P process 192
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1.3) - Paragraph 5907(1.3)(a) overview of FAT rules re consolidated US return with R&D credit 399

13 January 2015 Internal T.I. 2013-0497361I7 F - Services performed by a foreign affiliate

A foreign affiliate ("FA1") of a Canadian manufacturer (the "Taxpayer") provides testing services to the Taxpayer on products (namely, prototypes)...

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Words and Phrases
in connection with
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(3) - Paragraph 95(3)(d) prototype testing services not manufacturing 123

Paragraph 95(3)(d)

Administrative Policy

1 February 2018 Internal T.I. 2016-0671921I7 - R&D Services - 95(2)(b) vs 247(2) & 95(3)(b), (d)

Four U.S.-resident controlled foreign affiliates of a Canadian public corporation (“Canco”), namely, CFA1 (wholly-owned by Canco), and CFA2,...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(b) - Subparagraph 95(2)(b)(i) - Clause 95(2)(b)(i)(A) provision of services for fee by CFA to Canco on arm’s length terms did not oust s. 95(2)(b)(i)(A) 173
Tax Topics - Income Tax Act - Section 95 - Subsection 95(3) - Paragraph 95(3)(b) R&D services of CFAs not immediately related to the sale of goods by Canco 215
Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1.3) - Paragraph 5907(1.3)(a) overview of FAT rules re consolidated US return with R&D credit 399

13 January 2015 Internal T.I. 2013-0497361I7 F - Services performed by a foreign affiliate

A foreign affiliate of a Canadian manufacturing company (the taxpayer) provided services to the taxpayer of testing prototypes (manufactured by...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(3) - Paragraph 95(3)(b) prototype testing services not directly related to sales of improved product 189

Subsection 95(3.03)

Articles

Joint Committee, "August 2022 legislative proposals relating to the Income Tax Act and the Income Tax Regulations", 16 February 2023 Joint Committee Submission

Need to assimilate ancillary provisions to s. 95(3.03) tests (p. 7)

  • Although proposed s. 95(3.03) is modelled on the provision of relief in...

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Silvia Wang, Clara Pham, "The Amended Service FAPI Rule: New Relief Available", International Tax Highlights, Vol. 1, No. 2 November 2022, p. 8

Similarity of conditions to those in s. 95(2)(a)(ii)(D) (p. 8)

  • The exception in draft s. 95(3.03) to s. 95(2)(b)(i) sets out conditions that are...

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Subsection 95(3.1) - Designated property — subparagraph (2)(a.1)(i)

Subsection 95(4) - Definitions

Direct Equity Percentage

Administrative Policy

2010 Ruling 2010-0373801R3 - Conversion from a BV to a DC

A foreign cooperative, treated as a corporation under the foreign nation's law, is deemed to have "shares" for the purposes of determining "direct...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 85.1 - Subsection 85.1(3) drop-down by the two Cdn. “shareholders” of Dutch co-op (DC) of FAs in consideration for proportionate “increases” in their membership interests considered to be for “shares” 199
Tax Topics - Income Tax Act - Section 86 - Subsection 86(1) exchange of shares in Netherlands BV for membership interests in Dutch coop qualified under s. 86 147
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Share membership interest in Dutch coop a share 139
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition conversion of Netherlands BV to Dutch co-op 97

25 November 1998 External T.I. 9810015 - DEEMED SHARES OF AN LLC

In the case of a Delaware LLC whose capital was divided into two classes: Class 1 interests representing the common equity; and Class 2 interests...

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Eligible Controlled Foreign Affiliate

Finance

16 May 2018 IFA Finance Roundtable, Q.8

For the foreign affiliate reorganizations referred to in ss. 88(3) and 95(2)(c), (d.1) and (e), transfers of capital property are deemed to have...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Participating Percentage deemed nil percentage produce anomalous results under RCB rules 124

Subsection 95(6) - Where rights or shares issued, acquired or disposed of to avoid tax

Administrative Policy

Income Tax Technical News, No. 36 "Paragraph 95(6)(b)"

18 March 1999 9903126 - SUBSECTION 95(6) OF ITA95(6)

S.95(6) applies with respect to provisions of the Act not contained in subdivision (i), including s. 122.3(1). It is not necessary that the...

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Articles

Jack, "The Foreign Affiliate Rules: The 1995 Amendments", 1995 Canadian Tax Journal, Vol. 43, No. 2, p. 347

Discussion of s. 95(6) at pp. 350-353.

Paragraph 95(6)(b)

Cases

Canada v. Lehigh Cement Limited, 2014 DTC 5058 [at 6849], 2014 FCA 103, aff'g 2013 DTC 1139 [at 740], 2013 TCC 176

The taxpayer ("CBR Canada") directly (as to 99%) and indirectly (through a wholly-owned Alberta subsidiary as to 1%) used $US 100 million borrowed...

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Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Consistency restricting of anti-avoidance rule to avoid arbitrary application 158
Tax Topics - Statutory Interpretation - Headings provision not in Tax Avoidance Part of Act 149

See Also

Univar Canada Ltd. v. The Queen, 2005 DTC 1478, 2005 TCC 723

The taxpayer incorporated a Barbados subsidiary ("BarbadosCo") using borrowed money to subscribe for the shares of BarbadosCo, and BarbadosCo used...

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Administrative Policy

11 April 2017 Internal T.I. 2016-0670541I7 - Foreign affiliate share redemption

Canco held the preferred, but not the common, shares of a Barbados International Business Company (“FA”), and its preferred shares were...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 90 - Subsection 90(2) portion of proceeds paid on a redemption might be respected as a dividend (subject to s. 95(6)) if this is clearly indicated in accordance with Barbados law 303
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Dividend redemption proceeds might in part be a dividend under Barbados law 147

2 December 2014 CTF Roundtable, Q. 9

After being asked to comment on Lehigh, CRA responded:

The CRA accepts the decision in the Lehigh Cement case that paragraph 95(6)(b) is generally...

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22 May 2014 May IFA Roundtable, 2014-0526761C6 - Foreign affiliate share acquisition or disposition

Over the 2010-2013 period a total of 19 cases were considered by the s. 95(6) Committee, which recommended in seven cases that s. 95(6)(b) be...

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8 February 2006 External T.I. 2004-0064811E5 - Subsection 15(2)

Canco is wholly-owned by MNC, a non-resident multi-national corporation. All the treasury functions for the group are carried out by Canco, which...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.3) debt does not include a loan 287

Income Tax Technical News, No. 36, 27 July 2007.

21 May 1996 External T.I. 9526865 - 95(2)(A) - DIRECTLY OR INDIRECTLY

Discussion of the application of the "directly or indirectly" test where a loan made by a foreign affiliate of Canco ("FA") to a related...

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Articles

Angelo Nikolakakis, "Lehigh Cement Limited v. The Queen – A Bridge Too FAAAR", International Tax Planning, Volume XIX, No. 1, 2013, p. 1284

Essentially an indirect loan (p.1284)

[I]n essence, the decision involves the potential application of paragraph 95(6)(b) to a taxpayer's...

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Nathan Boidman, "The Troubling Effects for Canadian MNEs of the Decision in Lehigh", Tax Notes International, 17 June 2013, p. 1211

(Similar comments on the purpose of s. 95(6) are made by him at Tax Notes International, 12 May 2014 at p. 528 before indicating at p. 529 that...

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Elizabeth J. Johnson, "CRA's Latest Views on Paragraph 95(6)(b) Foreign Affiliate Anti-Avoidance Rule: Reflections", International Tax, CCH, October 2007, No. 36, p. 6.

Elizabeth J. Johnson, Geneviève C. Lille, James R. Wilson, "A Recent Response to the CRA's View on the Scope and Interpretation of Paragraph 95(6)(b)", 2006 Canadian Tax Journal, Vol. 54, No. 3, p. 571.

Subsection 95(8)

Administrative Policy

26 July 2005 External T.I. 2004-0097031E5 F - Règles sur les entités de placement étrangères

100 Canadian-resident individuals form Canco and each subscribe $1M for a separate class of Canco preferred shares, which invests in preferred...

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Finance

15 May 2019 IFA Finance Roundtable – “Tracking Interest Rules & Umbrella Corporations”

It is not clear to Finance that the compliance burden on a Canadian investor under the tracking interest rules is unusually onerous compared with...

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Articles

Peter Lee, Annika Wang, "The Tracking Interest Rules", International Tax (Wolters Kluwer CCH), No. 193, December 2018, p.5

Different types of segregated account companies (“SACs”) (p. 5)

The late 1990s saw the emergence of a new form of corporate vehicle,...

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Subsection 95(9)

Articles

Nathan Boidman, "Canada Targets Conduits and Tracking Shares", Tax Notes International, September 17, 2018, p. 1223

Elimination under s. 95(9) of benefit of there being one business with over 5 employees (pp. 1224-1225)

If an FA carries on more than one business...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(12) 450

Subsection 95(11)

Administrative Policy

25 November 2021 CTF Roundtable Q. 7, 2021-0911871C6 - Sub-funds and TrackRules Sub 95(8) (12)

An umbrella corporation has three classes of tracking-interest shares (A, B and C) which each track to a corresponding Sub-Fund (A, B or C). A...

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Paragraph 95(11)(e)

Articles

Peter Lee, Annika Wang, "The Tracking Interest Rules", International Tax (Wolters Kluwer CCH), No. 193, December 2018, p.5

S. 95(11)(e) rule (p. 9)

[I]f the taxpayer holds: (1) property that is a tracking interest in an affiliate; and (2) shares of a class of the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(8) 508

Subsection 95(12)

Articles

Nathan Boidman, "Canada Targets Conduits and Tracking Shares", Tax Notes International, September 17, 2018, p. 1223

Previous use of cell companies for controlled foreign affiliate (CFA) avoidance (p. 1225)

…CFA avoidance arrangements surfaced years ago in...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(9) 131

Joint Committee, "July 27, 2018 Legislative Proposals", 10 September 2018 Submission

Frequent need for Canadian investors in umbrella funds to make the election (pp. 13-14)

Where foreign investment funds are structured as corporate...

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