Marginal note:Definitions for this subdivision
95 (1) In this subdivision,
active business
entreprise exploitée activement
active business of a foreign affiliate of a taxpayer means any business carried on by the affiliate other than
(a) an investment business carried on by the affiliate, or
(b) a business that is deemed by subsection 95(2) to be a business other than an active business carried on by the affiliate; (entreprise exploitée activement)
controlled foreign affiliate
société étrangère affiliée contrôlée
controlled foreign affiliate, at any time, of a taxpayer resident in Canada means a foreign affiliate of the taxpayer that was, at that time, controlled by
(a) the taxpayer,
(b) the taxpayer and not more than four other persons resident in Canada,
(c) not more than 4 persons resident in Canada, other than the taxpayer,
(d) a person or persons with whom the taxpayer does not deal at arm’s length, or
(e) the taxpayer and a person or persons with whom the taxpayer does not deal at arm’s length; (société étrangère affiliée contrôlée)
excluded property
bien exclu
excluded property of a foreign affiliate of a taxpayer means any property of the foreign affiliate that is
(a) used or held by the foreign affiliate principally for the purpose of gaining or producing income from an active business,
(b) shares of the capital stock of another foreign affiliate of the taxpayer where all or substantially all of the property of the other foreign affiliate is excluded property, or
(c) an amount receivable the interest on which is, or would be if interest were payable thereon, income from an active business by virtue of subparagraph 95(2)(a)(ii),
and, for the purposes of the definitions foreign affiliate in this subsection and direct equity percentage in subsection 95(4) as they apply to this definition, where at any time a foreign affiliate of a taxpayer has an interest in a partnership,
(d) the partnership shall be deemed to be a non-resident corporation having capital stock of a single class divided into 100 issued shares, and
(e) the affiliate shall be deemed to own at that time that proportion of the issued shares of that class that
(i) the fair market value of the affiliate’s interest in the partnership at that time
is of
(ii) the fair market value of all interests in the partnership at that time; (bien exclu)
foreign accrual property income
revenu étranger accumulé, tiré de biens
foreign accrual property income of a foreign affiliate of a taxpayer, for any taxation year of the affiliate, means the amount determined by the formula
(A + A.1 + A.2 + B + C) - (D + E + F + G + H)
where
- A
- is the amount that would, if section 80 did not apply to the affiliate for the year or a preceding taxation year, be the total of the affiliate’s incomes for the year from property and businesses (other than active businesses) determined as if each amount described in clause 95(2)(a)(ii)(D) that was paid or payable, directly or indirectly, by the affiliate to another foreign affiliate of either the taxpayer or a person with whom the taxpayer does not deal at arm’s length were nil where an amount in respect of the income derived by the other foreign affiliate from that amount that was paid or payable to it by the affiliate was added in computing its income from an active business, other than
(a) interest that would, by virtue of paragraph 81(1)(m), not be included in computing the income of the affiliate if it were resident in Canada,
(b) a dividend from another foreign affiliate of the taxpayer,
(c) a taxable dividend to the extent that the amount thereof would, if the dividend were received by the taxpayer, be deductible by the taxpayer under section 112, or
(d) any amount included because of subsection 80.4(2) in the affiliate’s income in respect of indebtedness to another corporation that is a foreign affiliate of the taxpayer or of a person resident in Canada with whom the taxpayer does not deal at arm’s length,
- A.1
- is twice the total of all amounts included in computing the affiliate’s income from property or businesses (other than active businesses) for the year because of subsection 80(13),
- A.2
- is the amount determined for G in respect of the affiliate for the preceding taxation year,
- B
- is such portion of the affiliate’s taxable capital gains for the year from dispositions of property, other than dispositions of excluded property to which none of paragraphs 95(2)(c), 95(2)(d) and 95(2)(e) apply, as may reasonably be considered to have accrued after its 1975 taxation year,
- C
- is, where the affiliate is a controlled foreign affiliate of the taxpayer, the amount that would be required to be included in computing its income for the year if
(a) subsection 94.1(1) were applicable in computing that income,
(b) the words “earned directly by the taxpayer” in that subsection were replaced by the words “earned by the person resident in Canada in respect of whom the taxpayer is a foreign affiliate”,
(c) the words “other than a controlled foreign affiliate of the taxpayer or a prescribed non-resident entity” in paragraph 94.1(1)(a) were replaced by the words “other than a prescribed non-resident entity or a controlled foreign affiliate of a person resident in Canada of whom the taxpayer is a controlled foreign affiliate”, and
(d) the words “other than a capital gain” in paragraph 94.1(1)(g) were replaced by the words “other than any income that would not be included in the taxpayer’s foreign accrual property income for the year if the value of C in the definition foreign accrual property income in subsection 95(1) were nil and other than a capital gain”,
- D
- is the total of the affiliate’s losses for the year from property and businesses (other than active businesses) determined as if there were not included in the affiliate’s income any amount described in any of paragraphs (a) to (d) of the description of A and as if each amount described in clause 95(2)(a)(ii)(D) that was paid or payable, directly or indirectly, by the affiliate to another foreign affiliate of either the taxpayer or a person with whom the taxpayer does not deal at arm’s length were nil where an amount in respect of the income derived by the other foreign affiliate from that amount that was paid or payable to it by the affiliate was added in computing its income from an active business,
- E
- is such portion of the affiliate’s allowable capital losses for the year from dispositions of property, other than dispositions of excluded property to which none of paragraphs 95(2)(c), 95(2)(d) and 95(2)(e) apply, as may reasonably be considered to have accrued after its 1975 taxation year,
- F
- is the amount claimed by the taxpayer, which amount may not be greater than the amount prescribed to be the deductible loss of the affiliate for the year,
- G
- is the amount, if any, by which
(a) the total of amounts determined for A.1 and A.2 in respect of the affiliate for the year
exceeds
(b) the total of all amounts determined for D to F in respect of the affiliate for the year, and
- H
- is
(a) where the affiliate was a member of a partnership at the end of the fiscal period of the partnership that ended in the year and the partnership received a dividend at a particular time in that fiscal period from a corporation that was, for the purposes of sections 93 and 113, a foreign affiliate of the taxpayer at that particular time, the portion of the amount of that dividend that is included in the value of A in respect of the affiliate for the year and that is deemed by paragraph 93.1(2)(a) to have been received by the affiliate for the purposes of sections 93 and 113, and
(b) in any other case, nil; (revenu étranger accumulé, tiré de biens)
foreign accrual tax
impôt étranger accumulé
foreign accrual tax applicable to any amount included in computing a taxpayer’s income by virtue of subsection 91(1) for a taxation year in respect of a particular foreign affiliate of the taxpayer means
(a) the portion of any income or profits tax that was paid by
(i) the particular affiliate, or
(ii) any other foreign affiliate of the taxpayer in respect of a dividend received from the particular affiliate
and that may reasonably be regarded as applicable to that amount, and
(b) any amount prescribed in respect of the particular affiliate to be foreign accrual tax applicable to that amount; (impôt étranger accumulé)
foreign affiliate
société étrangère affiliée
foreign affiliate, at any time, of a taxpayer resident in Canada means a non-resident corporation in which, at that time,
(a) the taxpayer’s equity percentage is not less than 1%, and
(b) the total of the equity percentages in the corporation of the taxpayer and of each person related to the taxpayer (where each such equity percentage is determined as if the determinations under paragraph (b) of the definition equity percentage in subsection 95(4) were made without reference to the equity percentage of any person in the taxpayer or in any person related to the taxpayer) is not less than 10%,
except that a corporation is not a foreign affiliate of a non-resident-owned investment corporation; (société étrangère affiliée)
foreign bank
banque étrangère
foreign bank means an entity that would be a foreign bank within the meaning assigned by the definition of that expression in section 2 of the Bank Act if
(a) that definition were read without reference to the portion thereof after paragraph (g) thereof, and
(b) the entity had not been exempt under section 12 of that Act from being a foreign bank; (banque étrangère)
income from an active business
revenu provenant d’une entreprise exploitée activement
income from an active business of a foreign affiliate of a taxpayer for a taxation year includes, for greater certainty, any income of the affiliate for the year that pertains to or is incident to that business but does not include
(a) other income that is its income from property for the year, or
(b) its income for the year from a business that is deemed by subsection 95(2) to be a business other than an active business carried on by the affiliate; (revenu provenant d’une entreprise exploitée activement)
income from property
revenu de biens
income from property of a foreign affiliate of a taxpayer for a taxation year includes its income for the year from an investment business and its income for the year from an adventure or concern in the nature of trade, but, for greater certainty, does not include its income for the year that is because of subsection 95(2) included in its income from an active business or in its income from a business other than an active business; (revenu de biens)
investment business
entreprise de placement
investment business of a foreign affiliate of a taxpayer means a business carried on by the affiliate in a taxation year (other than a business deemed by subsection 95(2) to be a business other than an active business carried on by the affiliate) the principal purpose of which is to derive income from property (including interest, dividends, rents, royalties or any similar returns or substitutes therefor), income from the insurance or reinsurance of risks, income from the factoring of trade accounts receivable, or profits from the disposition of investment property, unless it is established by the taxpayer or the affiliate that, throughout the period in the year during which the business was carried on by the affiliate,
(a) the business (other than any business conducted principally with persons with whom the affiliate does not deal at arm’s length) is
(i) a business carried on by it as a foreign bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities, the activities of which are regulated in the country in which the business is principally carried on, or
(ii) the development of real estate for sale, the lending of money, the leasing or licensing of property or the insurance or reinsurance of risks, and
(b) the affiliate or, where the affiliate carries on the business as a member of a partnership (except where the affiliate is a specified member of the partnership in a fiscal period of the partnership that ends in the year), the partnership employs
(i) more than 5 employees full time in the active conduct of the business, or
(ii) the equivalent of more than 5 employees full time in the active conduct of the business taking into consideration only the services provided by its employees and the services provided outside Canada to the affiliate or the partnership by the employees of
(A) a corporation related to the affiliate (otherwise than because of a right referred to in paragraph 251(5)(b)), or
(B) members of the partnership (other than a member of the partnership that was a specified member of the partnership in a fiscal period of the partnership that ends in the year)
where the corporation or members referred to in clause (A) or (B) receive compensation from the affiliate or the partnership for the services provided to the affiliate or the partnership by those employees the value of which is not less than the cost to such corporation or members of the compensation paid or accruing to the benefit of those employees that performed the services during the time the services were performed by those employees; (entreprise de placement)
investment property
bien de placement
investment property of a foreign affiliate of a taxpayer includes
(a) a share of the capital stock of a corporation other than a share of another foreign affiliate of the taxpayer that is excluded property of the affiliate,
(b) an interest in a partnership other than an interest in a partnership that is excluded property of the affiliate,
(c) an interest in a trust other than an interest in a trust that is excluded property of the affiliate,
(d) indebtedness or annuities,
(e) commodities or commodities futures purchased or sold, directly or indirectly in any manner whatever, on a commodities or commodities futures exchange (except commodities manufactured, produced, grown, extracted or processed by the affiliate or a person to whom the affiliate is related (otherwise than because of a right referred to in paragraph 251(5)(b)) or commodities futures in respect of such commodities),
(f) currency,
(g) real estate,
(h) Canadian and foreign resource properties,
(i) interests in funds or entities other than corporations, partnerships and trusts, and
(j) interests or options in respect of property that is included in any of paragraphs (a) to (i); (bien de placement)
lease obligation
obligation découlant d’un bail
lease obligation of a person includes an obligation under an agreement that authorizes the use of or the production or reproduction of property including information or any other thing; (obligation découlant d’un bail)
lending of money
prêt d’argent
lending of money by a person (for the purpose of this definition referred to as the “lender”) includes
(a) the acquisition by the lender of trade accounts receivable (other than trade accounts receivable owing by a person with whom the lender does not deal at arm’s length) from another person or the acquisition by the lender of any interest in any such accounts receivable,
(b) the acquisition by the lender of loans made by and lending assets (other than loans or lending assets owing by a person with whom the lender does not deal at arm’s length) of another person or the acquisition by the lender of any interest in such a loan or lending asset,
(c) the acquisition by the lender of a foreign resource property (other than a foreign resource property that is a rental or royalty payable by a person with whom the lender does not deal at arm’s length) of another person, and
(d) the sale by the lender of loans or lending assets (other than loans or lending assets owing by a person with whom the lender does not deal at arm’s length) or the sale by the lender of any interest in such loans or lending assets;
and for the purpose of this definition, the definition lending asset in subsection 248(1) shall be read without the words “but does not include a prescribed property”; (prêt d’argent)
licensing of property
concession d’une licence sur un bien
licensing of property includes authorizing the use of or the production or reproduction of property including information or any other thing; (concession d’une licence sur un bien)
participating percentage
pourcentage de participation
participating percentage of a particular share owned by a taxpayer of the capital stock of a corporation in respect of any foreign affiliate of the taxpayer that was, at the end of its taxation year, a controlled foreign affiliate of the taxpayer is
(a) where the foreign accrual property income of the affiliate for that year is $5,000 or less, nil, and
(b) where the foreign accrual property income of the affiliate for that year exceeds $5,000,
(i) where the affiliate and each corporation that is relevant to the determination of the taxpayer’s equity percentage in the affiliate has only one class of issued shares at the end of that taxation year of the affiliate, the percentage that would be the taxpayer’s equity percentage in the affiliate at that time on the assumption that the taxpayer owned no shares other than the particular share (but in no case shall that assumption be made for the purpose of determining whether or not a corporation is a foreign affiliate of the taxpayer), and
(ii) in any other case, the percentage determined in prescribed manner; (pourcentage de participation)
relevant tax factor
facteur fiscal approprié
relevant tax factor means
(a) where the taxpayer is an individual, 2, or
(b) where the taxpayer is a corporation, the quotient obtained when one is divided by the percentage set out in paragraph 123(1)(a); (facteur fiscal approprié)
surplus entitlement percentage
pourcentage de droit au surplus
surplus entitlement percentage, at any time, of a taxpayer in respect of a foreign affiliate has the meaning assigned by regulation; (pourcentage de droit au surplus)
taxation year
année d’imposition
taxation year in relation to a foreign affiliate of a taxpayer means the period for which the accounts of the foreign affiliate have been ordinarily made up, but no such period may exceed 53 weeks. (année d’imposition)
trust company
société de fiducie
trust company includes a corporation that is resident in Canada and that is a loan company as defined in subsection 2(1) of the Canadian Payments Association Act. (société de fiducie)
Marginal note:Determination of certain components of foreign accrual property income
(2) For the purposes of this subdivision,
(a) in computing the income from an active business for a taxation year of a particular foreign affiliate of a taxpayer in respect of which the taxpayer has a qualifying interest throughout the year there shall be included any income of the affiliate for that year from sources in a country other than Canada that would otherwise be income from property of the affiliate for the year to the extent that
(i) the income
(A) is derived by the particular affiliate from activities that can reasonably be considered to be directly related to the active business activities carried on in a country other than Canada by
(I) any other non-resident corporation to which the particular affiliate and the taxpayer are related throughout the year, or
(II) the taxpayer, where the taxpayer is a life insurance corporation resident in Canada throughout the year, and
(B) would be included in computing the amount prescribed to be the earnings or loss from an active business carried on in a country other than Canada of
(I) the non-resident corporation to which the particular affiliate and the taxpayer are related throughout the year, or
(II) the taxpayer, where the taxpayer is a life insurance corporation resident in Canada throughout the year
if it were a foreign affiliate of the taxpayer and the income were earned by it,
(ii) the income is derived from amounts that were paid or payable, directly or indirectly, to the particular affiliate or a partnership of which the particular affiliate was a member
(A) by
(I) a non-resident corporation to which the particular affiliate and the taxpayer are related throughout the year, or
(II) a partnership of which a non-resident corporation to which the particular affiliate and the taxpayer are related throughout the year is a member and of which that non-resident corporation is not a specified member at any time in a fiscal period of the partnership that ends in the year
to the extent that those amounts that were paid or payable are for expenditures that would, if the non-resident corporation or the partnership were a foreign affiliate of the taxpayer, be deductible by it in the year or a subsequent year in computing the amounts prescribed to be its earnings or loss from an active business, other than an active business carried on in Canada,
(B) by
(I) another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year, or
(II) a partnership of which another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year is a member and of which that other affiliate is not a specified member at any time in a fiscal period of the partnership that ends in the year
to the extent that those amounts that were paid or payable are for expenditures that were or would be, if the partnership were a foreign affiliate of the taxpayer, deductible in the year or a subsequent taxation year by the other affiliate or the partnership in computing the amounts prescribed to be its earnings or loss from an active business, other than an active business carried on in Canada,
(C) by a partnership of which the particular affiliate is a member and of which the particular affiliate is not a specified member at any time in a fiscal period of the partnership that ends in the year to the extent that those amounts that were paid or payable were for expenditures that would be, if the partnership were a foreign affiliate of the taxpayer, deductible in the year or a subsequent year in computing the amounts prescribed to be its earnings or loss from an active business carried on by it outside Canada,
(D) by another foreign affiliate of the taxpayer (in this clause referred to as the “second affiliate”) to which the particular affiliate and the taxpayer are related throughout the year to the extent that the amounts are paid or payable by the second affiliate
(I) under a legal obligation to pay interest on borrowed money used for the purpose of earning income from property, or
(II) on an amount payable for property acquired for the purpose of gaining or producing income from property
where
(III) the property is excluded property of the second affiliate that is shares of a foreign affiliate (other than the particular affiliate) of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year (in this clause referred to as the “third affiliate”),
(IV) the second and third affiliates are resident in and subject to income taxation in the same country, and
(V) the amounts paid or payable are relevant in computing the liability for income taxes in that country of the members of a group of corporations composed of the second affiliate and one or more other foreign affiliates of the taxpayer (the shares of which are excluded property) that are resident and subject to income taxation in that country and in respect of which the taxpayer has a qualifying interest throughout the year, or
(E) by the taxpayer, where the taxpayer is a life insurance corporation resident in Canada (in this clause referred to as the “insurer”), to the extent that those amounts that were paid or payable were for expenditures that are deductible in the year or a subsequent taxation year by the insurer in computing its income or loss from carrying on its life insurance business outside Canada and are not deductible in the year or a subsequent taxation year in computing its income or loss from carrying on its life insurance business in Canada,
(iii) the income is derived by the particular affiliate from the factoring of trade accounts receivable acquired by the particular affiliate or a partnership of which the particular affiliate was a member from a non-resident corporation to which the particular affiliate and the taxpayer are related throughout the year to the extent that the accounts receivable arose in the course of an active business carried on in a country other than Canada by the non-resident corporation, or
(iv) the income is derived by the particular affiliate from loans or lending assets acquired by the particular affiliate or a partnership of which the particular affiliate was a member from a non-resident corporation to which the particular affiliate and the taxpayer are related throughout the year to the extent that the loans or lending assets arose in the course of an active business carried on in a country other than Canada by the non-resident corporation;
(a.1) in computing the income from a business other than an active business for a taxation year of a foreign affiliate of a taxpayer there shall be included the income of the affiliate for the year from the sale of property (which, for the purposes of this paragraph, includes the income of the affiliate for the year from the performance of services as an agent in relation to a purchase or sale of property) where
(i) it is reasonable to conclude that the cost to any person of the property (other than property that was manufactured, produced, grown, extracted or processed in Canada by the taxpayer or a person with whom the taxpayer does not deal at arm’s length in the course of carrying on a business in Canada and that was sold to non-resident persons other than the affiliate or sold to the affiliate for sale to non-resident persons) is relevant in computing the income from a business carried on by the taxpayer or a person resident in Canada with whom the taxpayer does not deal at arm’s length or is relevant in computing the income from a business carried on in Canada by a non-resident person with whom the taxpayer does not deal at arm’s length, and
(ii) the property was not manufactured, produced, grown, extracted or processed in the country under whose laws the affiliate was formed or continued and exists and is governed and in which the affiliate’s business is principally carried on,
unless more than 90% of the gross revenue of the affiliate for the year from the sale of property is derived from the sale of such property (other than a property described in subparagraph 95(2)(a.1)(ii) the cost of which to any person is a cost referred to in subparagraph 95(2)(a.1)(i)) to persons with whom the affiliate deals at arm’s length (which, for this purpose, includes a sale of property to a non-resident corporation with which the affiliate does not deal at arm’s length for sale to persons with whom the affiliate deals at arm’s length) and, where this paragraph applies to include income of the affiliate from the sale of property in the income of the affiliate from a business other than an active business,
(iii) the sale of such property shall be deemed to be a separate business, other than an active business, carried on by the affiliate, and
(iv) any income of the affiliate that pertains to or is incident to that business shall be deemed to be income from a business other than an active business;
(a.2) in computing the income from a business other than an active business for a taxation year of a foreign affiliate of a taxpayer there shall be included the income of the affiliate for the year from the insurance of a risk (which, for the purposes of this paragraph, includes income of the affiliate for the year from the reinsurance of a risk) where the risk was in respect of
(i) a person resident in Canada,
(ii) a property situated in Canada, or
(iii) a business carried on in Canada
unless more than 90% of the gross premium revenue of the affiliate for the year from the insurance of risks (net of reinsurance ceded) was in respect of the insurance of risks (other than risks in respect of a person, a property or a business described in subparagraphs 95(2)(a.2)(i) to 95(2)(a.2)(iii)) of persons with whom the affiliate deals at arm’s length and, where this paragraph applies to include income of the affiliate from the insurance of risks in the income of the affiliate from a business other than an active business,
(iv) the insurance of those risks shall be deemed to be a separate business, other than an active business, carried on by the affiliate, and
(v) any income of the affiliate that pertains to or is incident to that business shall be deemed to be income from a business other than an active business;
(a.3) in computing the income from a business other than an active business for a taxation year of a foreign affiliate of a taxpayer there shall be included the income of the affiliate for the year derived directly or indirectly from indebtedness and lease obligations (which, for the purposes of this paragraph, includes the income of the affiliate for the year from the purchase and sale of indebtedness and lease obligations on its own account, but does not include excluded income)
(i) of persons resident in Canada, or
(ii) in respect of businesses carried on in Canada
unless more than 90% of the gross revenue of the affiliate derived directly or indirectly from indebtedness and lease obligations (other than excluded revenue) was derived directly or indirectly from indebtedness and lease obligations of non-resident persons with whom the affiliate deals at arm’s length and, where this paragraph applies to include income of the affiliate for the year in the income of the affiliate from a business other than an active business,
(iii) those activities carried out to earn such income shall be deemed to be a separate business, other than an active business, carried on by the affiliate, and
(iv) any income of the affiliate that pertains to or is incident to that business shall be deemed to be income from a business other than an active business;
(a.4) in computing the income from a business other than an active business for a taxation year of a foreign affiliate of a taxpayer there shall be included (to the extent not included under paragraph 95(2)(a.3) in such income of the affiliate for the year) that proportion of the income of the affiliate for the year derived directly or indirectly from indebtedness and lease obligations (which, for the purposes of this paragraph, includes the income of the affiliate for the year from the purchase and sale of indebtedness and lease obligations on its own account) in respect of a business carried on outside Canada by a partnership (any portion of the income or loss of which for fiscal periods of the partnership that end in the year is included or would, if the partnership had an income or loss for such fiscal periods, be included directly or indirectly in computing the income or loss of the taxpayer or a person resident in Canada with whom the taxpayer does not deal at arm’s length) that
(i) the total of all amounts each of which is the income or loss of the partnership for fiscal periods of the partnership that end in the year that are included directly or indirectly in computing the income or loss of the taxpayer or a person resident in Canada with whom the taxpayer does not deal at arm’s length
is of
(ii) the total of all amounts each of which is the income or loss of the partnership for fiscal periods of the partnership that end in the year
unless more than 90% of the gross revenue of the affiliate derived directly or indirectly from indebtedness and lease obligations was derived directly or indirectly from indebtedness and lease obligations of non-resident persons with whom the affiliate deals at arm’s length (other than indebtedness and lease obligations of a partnership described in this paragraph) and where this paragraph applies to include a proportion of the income of the affiliate for the year in the income of the affiliate from a business other than an active business
(iii) those activities carried out to earn such income of the affiliate for the year shall be deemed to be a separate business, other than an active business, carried on by the affiliate, and
(iv) any income of the affiliate that pertains to or is incident to that business shall be deemed to be income from a business other than an active business
and for the purpose of this paragraph, where the income or loss of a partnership for a fiscal period that ends in the year is nil, the proportion of the income of the affiliate that is to be included in the income of the affiliate for the year from a business other than an active business shall be determined as if the partnership had income of $1,000,000 for that fiscal period;
(b) where a controlled foreign affiliate of a taxpayer provides services or an undertaking to provide services and
(i) the amount paid or payable in consideration therefor
(A) is deductible in computing the income from a business carried on in Canada by any person in relation to whom the affiliate is a controlled foreign affiliate or by a person related to that person, or
(B) was paid or payable by a person other than the taxpayer and can reasonably be considered to relate to an amount that was deductible by the taxpayer or a person related to the taxpayer in computing the income of that taxpayer or person from a business carried on in Canada, or
(ii) the services are performed or are to be performed by any person referred to in subparagraph 95(2)(b)(i) who is an individual resident in Canada,
the provision of those services or the undertaking to provide those services shall be deemed to be a separate business, other than an active business, carried on by the affiliate, and any income from that business or that pertains to or is incident to that business shall be deemed to be income from a business other than an active business;
(c) where a foreign affiliate of a taxpayer (in this paragraph referred to as the “disposing affiliate”) has disposed of capital property that was shares of the capital stock of another foreign affiliate of the taxpayer (in this paragraph referred to as the “shares disposed of”) to any corporation that was, immediately following the disposition, a foreign affiliate of the taxpayer (in this paragraph referred to as the “acquiring affiliate”) for consideration including shares of the capital stock of the acquiring affiliate,
(i) the cost to the disposing affiliate of any property (other than shares of the capital stock of the acquiring affiliate) receivable by the disposing affiliate as consideration for the disposition shall be deemed to be the fair market value of the property at the time of the disposition,
(ii) the cost to the disposing affiliate of any shares of any class of the capital stock of the acquiring affiliate receivable by the disposing affiliate as consideration for the disposition shall be deemed to be that proportion of the amount, if any, by which the total of the relevant cost bases to it, immediately before the disposition, of the shares disposed of exceeds the fair market value at that time of the consideration receivable for the disposition (other than shares of the capital stock of the acquiring affiliate) that
(A) the fair market value, immediately after the disposition, of those shares of the acquiring affiliate of that class
is of
(B) the fair market value, immediately after the disposition, of all shares of the capital stock of the acquiring affiliate receivable by the disposing affiliate as consideration for the disposition,
(iii) the disposing affiliate’s proceeds of disposition of the shares shall be deemed to be an amount equal to the cost to it of all shares and other property receivable by it from the acquiring affiliate as consideration for the disposition, and
(iv) the cost to the acquiring affiliate of the shares acquired from the disposing affiliate shall be deemed to be an amount equal to the disposing affiliate’s proceeds of disposition referred to in subparagraph 95(2)(c)(iii);
(d) where there has been a foreign merger in which the shares owned by a foreign affiliate of a taxpayer of the capital stock of a corporation that was a predecessor foreign corporation immediately before the merger were exchanged for or became shares of the capital stock of the new foreign corporation or the foreign parent corporation, subsection 87(4) applies to the foreign affiliate as if the references in that subsection to
(i) “amalgamation” were read as “foreign merger”,
(ii) “predecessor corporation” were read as “predecessor foreign corporation”,
(iii) “new corporation” were read as “new foreign corporation or the foreign parent corporation”, and
(iv) “adjusted cost base” were read as “relevant cost base”;
(d.1) where there has been a foreign merger of two or more predecessor foreign corporations, in respect of each of which a taxpayer’s surplus entitlement percentage was not less than 90% immediately before the merger, to form a new foreign corporation in respect of which the taxpayer’s surplus entitlement percentage immediately after the merger was not less than 90%, other than a foreign merger where, under the income tax law of the country in which the predecessor foreign corporations were resident immediately before the merger, a gain or loss was recognized in respect of any capital property of a predecessor foreign corporation that became capital property of the new foreign corporation in the course of the merger,
(i) each capital property of the new foreign corporation that was a capital property of a predecessor foreign corporation immediately before the merger shall be deemed to have been disposed of by the predecessor foreign corporation immediately before the merger for proceeds of disposition equal to the cost amount of the property to the predecessor foreign corporation at that time, and
(ii) for the purposes of this subsection and the definition foreign accrual property income in subsection 95(1), the new foreign corporation shall, with respect to any disposition by it of any capital property to which subparagraph 95(2)(d.1)(i) applied, be deemed to be the same corporation as, and a continuation of, the predecessor foreign corporation that owned the property immediately before the merger,
but for greater certainty nothing in this paragraph shall affect the determination of whether any property of a predecessor foreign corporation is disposed of on a foreign merger other than one to which this paragraph applies;
(e) except as otherwise provided in paragraph 95(2)(e.1), where on the dissolution of a foreign affiliate of a taxpayer (in this paragraph referred to as the “disposing affiliate”) one or more shares of the capital stock of another foreign affiliate of the taxpayer have been disposed of to a shareholder that is another foreign affiliate of the taxpayer,
(i) the disposing affiliate’s proceeds of disposition of each such share and the cost thereof to the shareholder shall be deemed to be an amount equal to the relevant cost base to the disposing affiliate of the share immediately before the dissolution, and
(ii) the shareholder’s proceeds of disposition of the shares of the disposing affiliate shall be deemed to be the amount, if any, by which the total of
(A) the cost to the shareholder of the shares of the other foreign affiliate, as determined in subparagraph 95(2)(e)(i), and
(B) the fair market value of any property (other than the shares referred to in clause 95(2)(e)(ii)(A)) disposed of by the disposing affiliate to the shareholder on the dissolution,
exceeds
(C) the total of all amounts each of which is the amount of any debt owing by the disposing affiliate, or of any other obligation of the disposing affiliate to pay any amount, that was outstanding immediately before the dissolution and that was assumed or cancelled by the shareholder on the dissolution;
(e.1) where there has been a liquidation and a dissolution of a foreign affiliate (in this paragraph referred to as the “disposing affiliate”) of a taxpayer in respect of which, immediately before the liquidation, the taxpayer’s surplus entitlement percentage was not less than 90%, other than a liquidation and a dissolution where, under the income tax law of the country in which the disposing affiliate was resident immediately before the liquidation, a gain or loss was recognized by the disposing affiliate in respect of any capital property distributed by it in the course of the liquidation to another foreign affiliate of the taxpayer resident in that country, the following rules apply:
(i) each capital property of the disposing affiliate that was so distributed to another foreign affiliate of the taxpayer shall be deemed to have been disposed of by the disposing affiliate for proceeds of disposition equal to the cost amount of the property to the disposing affiliate immediately before the distribution,
(ii) for the purposes of this subsection and the definition foreign accrual property income in subsection 95(1) , the other affiliate shall, with respect to any disposition by it of capital property to which subparagraph 95(2)(e.1)(i) applied, be deemed to be the same corporation as, and a continuation of, the disposing affiliate, and
(iii) the other affiliate’s proceeds of disposition of the shares of the capital stock of the disposing affiliate disposed of in the course of the liquidation shall be deemed to be the adjusted cost base of those shares to the other affiliate immediately before the disposition;
(f) except as otherwise provided in this subsection, each taxable capital gain and each allowable capital loss of a foreign affiliate of a taxpayer from the disposition of property shall be computed in accordance with Part I, read without reference to section 26 of the Income Tax Application Rules, as though the affiliate were resident in Canada
(i) where that gain or loss is the gain or loss of a controlled foreign affiliate from the disposition of property to which paragraph 95(2)(c), 95(2)(d) or 95(2)(e) or 88(3)(a) applies or from any other disposition of property (other than excluded property), in Canadian currency, and
(ii) in any other case, on the assumption that the currency of the country in which the affiliate is resident or such other currency as is reasonable in the circumstances (in this subparagraph referred to as the “calculating currency”) were the currency of Canada and, where subsection 39(2) is applicable, on the further assumptions that
(A) the reference in that subsection to “the currency or currencies of one or more countries other than Canada relative to Canadian currency” were read as a reference to “one or more currencies other than the calculating currency relative to the calculating currency”, and
(B) the references therein to “of a country other than Canada” were read as references to “of a country other than the country of the calculating currency”,
except that in computing any such gain or loss from the disposition of property owned by the affiliate at the time it last became a foreign affiliate of the taxpayer there shall not be included such portion of the gain or loss, as the case may be, as may reasonably be considered to have accrued during the period that the affiliate was not a foreign affiliate of
(iii) the taxpayer,
(iv) any person with whom the taxpayer was not dealing at arm’s length,
(v) any person with whom the taxpayer would not have been dealing at arm’s length if the person had been in existence after the taxpayer came into existence,
(vi) any predecessor corporation (within the meaning assigned by subsection 87(1)) of the taxpayer or of a person described in subparagraph 95(2)(f)(iv) or 95(2)(f)(v), or
(vii) any predecessor corporation (within the meaning assigned by paragraph 87(2)(l.2)) of the taxpayer or of a person described in subparagraph 95(2)(f)(iv) or 95(2)(f)(v);
(g) where, because of a fluctuation in the value of the currency of a country other than Canada relative to the value of Canadian currency, a particular foreign affiliate of a taxpayer in respect of which the taxpayer has a qualifying interest throughout a taxation year of the particular affiliate has earned income or incurred a loss or realized a capital gain or a capital loss in the year, in reference to
(i) a debt obligation that was owing to
(A) another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year or any other non-resident corporation to which the particular affiliate and the taxpayer are related throughout the year (referred to in this paragraph as a “qualified foreign corporation”), or
(B) the particular affiliate by a qualified foreign corporation,
(ii) the redemption, cancellation or acquisition of a share of the capital stock of, or the reduction of the capital of, the particular affiliate or another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year, or
(iii) the disposition to a qualified foreign corporation of a share of the capital stock of another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year,
that income, gain or loss, as the case may be, is deemed to be nil;
(g.1) in computing the foreign accrual property income of a foreign affiliate of a taxpayer the Act shall be read
(i) as if the expression “income, taxable income or taxable income earned in Canada, as the case may be” in the definition commercial debt obligation in subsection 80(1) were read as “foreign accrual property income (within the meaning assigned by subsection 95(1))”, and
(ii) without reference to subsections 80(3) to 80(12) and 80(15) and 80.01(5) to 80.01(11) and sections 80.02 to 80.04;
(g.2) for the purpose of computing the foreign accrual property income of a foreign affiliate of any taxpayer resident in Canada for a taxation year of the affiliate, an election made pursuant to paragraph 86.1(2)(f) in respect of a distribution received by the affiliate in a particular taxation year of the affiliate is deemed to have been filed under that paragraph by the affiliate if
(i) where there is only one taxpayer resident in Canada in respect of whom the affiliate is a controlled foreign affiliate, the election is filed by the taxpayer with the taxpayer’s return of income for the taxpayer’s taxation year in which the particular year of the affiliate ends, and
(ii) where there is more than one taxpayer resident in Canada in respect of whom the affiliate is a controlled foreign affiliate, all of those taxpayers jointly elect in writing and each of them files the joint election with the Minister with their return of income for their taxation year in which the particular year of the affiliate ends;
(h) [Repealed, 2001, c. 17, s. 73(8)]
(i) any gain or loss of a foreign affiliate of a taxpayer from the settlement or extinguishment of a debt that related at all times to the acquisition of excluded property shall be deemed to be a gain or loss from the disposition of excluded property;
(j) the adjusted cost base to a foreign affiliate of a taxpayer of an interest in a partnership at any time shall be such amount as is prescribed by regulation; and
(k) where, in a particular taxation year, a foreign affiliate of a taxpayer
(i) carries on an investment business outside Canada and, in the preceding taxation year, that business was not an investment business of the affiliate (or the definition investment business in subsection 95(1) did not apply in respect of the business in the preceding taxation year), or
(ii) is deemed by paragraph 95(2)(a.1), 95(2)(a.2), 95(2)(a.3) or 95(2)(a.4) to carry on a separate business, other than an active business, and, in the preceding taxation year, that paragraph did not apply to deem the affiliate to be carrying on that separate business,
for the purpose of computing the income of the affiliate from the investment business or the separate business as the case may be (in this subsection referred to as the “foreign business”) for the particular year and each subsequent taxation year in which the foreign business is carried on,
(iii) the affiliate shall be deemed
(A) to have begun to carry on the foreign business in Canada at the later of the time the particular year began or the time that it began to carry on the foreign business, and
(B) to have carried on the foreign business in Canada throughout that part of the particular year and each such subsequent taxation year in which the foreign business was carried on by it,
(iv) where the foreign business of the affiliate is a business in respect of which, if the foreign business were carried on in Canada, the affiliate would be required by law to report to a regulating authority in Canada such as the Superintendent of Financial Institutions or a similar authority of a province, the affiliate shall be deemed to have been required by law to report to and to have been subject to the supervision of such regulating authority, and
(v) paragraphs 138(11.91)(c) to 138(11.91)(f) apply to the affiliate for the particular year in respect of the foreign business as if
(A) the affiliate were the insurer referred to in subsection 138(11.91),
(B) the particular year of the affiliate were the particular year of the insurer referred to in that subsection, and
(C) the foreign business of the affiliate were the business of the insurer referred to in that subsection;
(l) in computing the income from property for a taxation year of a foreign affiliate of a taxpayer there shall be included the income of the affiliate for the year from a business (other than an investment business of the affiliate) the principal purpose of which is to derive income from trading or dealing in indebtedness (which for the purpose of this paragraph includes the earning of interest on indebtedness) other than
(i) indebtedness owing by persons with whom the affiliate deals at arm’s length who are resident in the country in which the affiliate was formed or continued and exists and is governed and in which the business is principally carried on, or
(ii) trade accounts receivable owing by persons with whom the affiliate deals at arm’s length,
unless
(iii) the business is carried on by the affiliate as a foreign bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities, the activities of which are regulated in the country under whose laws the affiliate was formed or continued and exists and is governed and in which the business is principally carried on, and
(iv) the taxpayer is
(A) a bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities resident in Canada, the business activities of which are subject by law to the supervision of a regulating authority such as the Superintendent of Financial Institutions or a similar authority of a province,
(B) a subsidiary wholly-owned corporation of a corporation described in clause 95(2)(l)(iv)(A), or
(C) a corporation of which a corporation described in clause 95(2)(l)(iv)(A) is a subsidiary wholly-owned corporation; and
(m) a taxpayer has a qualifying interest in respect of a foreign affiliate of the taxpayer at any time if, at that time, the taxpayer owned
(i) not less than 10% of the issued and outstanding shares (having full voting rights under all circumstances) of the affiliate, and
(ii) shares of the affiliate having a fair market value of not less than 10% of the fair market value of all the issued and outstanding shares of the affiliate
and for the purpose of this paragraph
(iii) where, at any time, shares of a corporation are owned or are deemed for the purposes of this paragraph to be owned by another corporation (in this paragraph referred to as the “holding corporation”), those shares shall be deemed to be owned at that time by each shareholder of the holding corporation in a proportion equal to the proportion of all such shares that
(A) the fair market value of the shares of the holding corporation owned at that time by the shareholder
is of
(B) the fair market value of all the issued shares of the holding corporation outstanding at that time,
(iv) where, at any time, shares of a corporation are property of a partnership or are deemed for the purposes of this paragraph to be property of a partnership, those shares shall be deemed to be owned at that time by each member of the partnership in a proportion equal to the proportion of all such shares that
(A) the member’s share of the income or loss of the partnership for its fiscal period that includes that time
is of
(B) the income or loss of the partnership for its fiscal period that includes that time
and for the purpose of this subparagraph, where the income and loss of the partnership for its fiscal period that includes that time are nil, that proportion shall be computed as if the partnership had income for the period in the amount of $1,000,000, and
(v) where, at any time, a person is a holder of convertible property issued by the affiliate before June 23, 1994 the terms of which confer on the holder the right to exchange the convertible property for shares of the affiliate and the taxpayer elects in its return of income for its first taxation year that ends after 1994 to have the provisions of this subparagraph apply to the taxpayer in respect of all the convertible property issued by the affiliate and outstanding at that time, each holder shall, in respect of the convertible property held by it at that time, be deemed to have, immediately before that time,
(A) exchanged the convertible property for shares of the affiliate, and
(B) acquired shares of the affiliate in accordance with the terms and conditions of the convertible property.
Rule for definition investment business
(2.1) For the purposes of the definition investment business in subsection 95(1), a foreign affiliate of a taxpayer, the taxpayer and, where the taxpayer is a corporation all the issued shares of which are owned by a corporation described in subparagraph 95(2.1)(a)(i), such corporation described in subparagraph 95(2.1)(a)(i) shall be considered to be dealing with each other at arm’s length in respect of the entering into of agreements that provide for the purchase, sale or exchange of currency and the execution of such agreements where
(a) the taxpayer is
(i) a bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities resident in Canada, the business activities of which are subject by law to the supervision of a regulating authority such as the Superintendent of Financial Institutions or a similar authority of a province, or
(ii) a subsidiary wholly-owned corporation of a corporation described in subparagraph 95(2.1)(a)(i);
(b) the agreements are swap agreements, forward purchase or sale agreements, forward rate agreements, futures agreements, options or rights agreements or similar agreements;
(c) the agreements are entered in the course of a business carried on by the affiliate principally with persons with whom the affiliate deals at arm’s length in the country under whose laws the affiliate was formed or continued and exists and is governed and in which the business is principally carried on; and
(d) the terms and conditions of such agreements are substantially the same as the terms and conditions of similar agreements made by persons dealing at arm’s length.
Marginal note:Rule for subsection (2)
(2.2) For the purpose of subsection (2),
(a) a non-resident corporation that was not a foreign affiliate of a taxpayer in respect of which the taxpayer had a qualifying interest throughout a particular taxation year shall be deemed to be a foreign affiliate of a taxpayer in respect of which the taxpayer had a qualifying interest throughout that year where
(i) a person has, in that year, acquired or disposed of shares of that non-resident corporation or any other corporation and, because of that acquisition or disposition, that non-resident corporation became or ceased to be a foreign affiliate of the taxpayer in respect of which the taxpayer had a qualifying interest, and
(ii) at the beginning of that year or at the end of that year, the non-resident corporation was a foreign affiliate of the taxpayer in respect of which the taxpayer had a qualifying interest; and
(b) a non-resident corporation that was not related to a foreign affiliate of a taxpayer and the taxpayer throughout a particular taxation year shall be deemed to be related to the foreign affiliate of the taxpayer and that taxpayer throughout that year where
(i) a person has, in that year, acquired or disposed of shares of that non-resident corporation or any other corporation and, because of that acquisition or disposition, that non-resident corporation became or ceased to be a non-resident corporation that was related to the foreign affiliate of the taxpayer and the taxpayer, and
(ii) at the beginning of that year or at the end of that year, the non-resident corporation was related to the foreign affiliate of the taxpayer and the taxpayer.
Marginal note:Application of paragraph (2)(a.1)
(2.3) Paragraph 95(2)(a.1) does not apply to a foreign affiliate of a taxpayer in respect of a sale or exchange of property that is currency or a right to purchase, sell or exchange currency where
(a) the taxpayer is
(i) a bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities resident in Canada, the business activities of which are subject by law to the supervision of a regulating authority such as the Superintendent of Financial Institutions or a similar authority of a province, or
(ii) a subsidiary wholly-owned corporation of a corporation described in subparagraph 95(2.3)(a)(i);
(b) the sale or exchange was made in the course of a business carried on by the affiliate principally with persons with whom the affiliate deals at arm’s length in the country under whose laws the affiliate was formed or continued and exists and is governed and in which the business is principally carried on by it; and
(c) the terms and conditions of the sale or exchange of such property are substantially the same as the terms and conditions of similar sales or exchanges of such property by persons dealing at arm’s length.
Marginal note:Application of paragraph (2)(a.3)
(2.4) Paragraph 95(2)(a.3) does not apply to a foreign affiliate of a taxpayer in respect of its income derived directly or indirectly from indebtedness to the extent that
(a) the income is derived by the affiliate in the course of a business conducted principally with persons with whom the affiliate deals at arm’s length carried on by it as a foreign bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities, the activities of which are regulated in the country under whose laws the affiliate was formed or continued and exists and is governed and in which the business is principally carried on, and
(b) the income is derived by the affiliate from trading or dealing in the indebtedness (which, for this purpose, consists of income from the actual trading or dealing in the indebtedness and interest earned by the affiliate during a short term holding period on indebtedness acquired by it for the purpose of the trading or dealing) with persons (in this subsection referred to as “regular customers”) with whom it deals at arm’s length who were resident in a country other than Canada in which it and any competitor (which is resident in the country in which the affiliate is resident and regulated in the same manner the affiliate is regulated in the country under whose laws the affiliate was formed or continued and exists and is governed and in which its business is principally carried on) compete and have a substantial market presence,
and, for the purpose of this subsection, an acquisition of indebtedness from the taxpayer shall be deemed to be part of the trading or dealing in indebtedness described in paragraph 95(2.4)(b) where the indebtedness is acquired by the affiliate and sold to regular customers and the terms and conditions of the acquisition and the sale are substantially the same as the terms and conditions of similar acquisitions and sales made by the affiliate in transactions with persons with whom it deals at arm’s length.
Marginal note:Definitions for paragraph (2)(a.3)
(2.5) For the purpose of paragraph 95(2)(a.3),
excluded income and excluded revenue
revenu exclu
excluded income and excluded revenue for a taxation year in respect of a foreign affiliate of a taxpayer mean, respectively, income or revenue, that is
(a) derived directly or indirectly from a specified deposit with a prescribed financial institution,
(b) derived directly or indirectly from a lease obligation of a person (other than the taxpayer or a person that does not deal at arm’s length with the taxpayer) relating to the use of property outside Canada, or
(c) included in computing the affiliate’s income for the year from carrying on a business through a permanent establishment in Canada; (revenu exclu)
indebtedness
dette
indebtedness does not include obligations of a person under agreements with non-resident corporations providing for the purchase, sale or exchange of currency where
(a) the agreements are swap agreements, forward purchase or sale agreements, forward rate agreements, futures agreements, options or rights agreements, or similar agreements,
(b) the person is a bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities resident in Canada, the business activities of which are subject by law to the supervision of a regulating authority in Canada such as the Superintendent of Financial Institutions or a similar authority of a province,
(c) the agreements are entered into by the non-resident corporation in the course of a business carried on by it principally with persons with which it deals at arm’s length in the country under whose laws the non-resident corporation was formed or continued and exists and is governed and in which the business is principally carried on by it, and
(d) the terms and conditions of such agreements are substantially the same as the terms and conditions of similar agreements made by persons dealing at arm’s length; (dette)
specified deposit
dépôt déterminé
specified deposit means a deposit of a foreign affiliate of a taxpayer resident in Canada with a prescribed financial institution resident in Canada where
(a) the income from the deposit is income of the affiliate for the year that would, but for paragraph 95(2)(a.3), be income from an active business carried on by it in a country other than Canada (other than a business the principal purpose of which is to derive income from property including interest, dividends, rents, royalties or similar returns or substitutes therefor or profits from the disposition of investment property), or
(b) the income from the deposit is income of the affiliate for the year that would, but for paragraph 95(2)(a.3), be income from an active business carried on by the affiliate principally with persons with whom the affiliate deals at arm’s length in the country under whose laws the affiliate was formed or continued and exists and is governed and in which the business is principally carried on by it and the deposit was held by the affiliate in the course of carrying on that part of the business conducted with non-resident persons with whom the affiliate deals at arm’s length or that part of the business conducted with a person with whom the affiliate was related where it can be demonstrated that the related person used or held the funds deposited in the course of a business carried on by the related person with non-resident persons with whom the related person and the affiliate deal at arm’s length. (dépôt déterminé)
Definition of services
(3) For the purposes of paragraph 95(2)(b), services includes the insurance of Canadian risks but does not include
(a) the transportation of persons or goods; or
(b) services performed in connection with the purchase or sale of goods.
Marginal note:Definitions
(4) In this section,
direct equity percentage
pourcentage d’intérêt direct
direct equity percentage at any time of any person in a corporation is the percentage determined by the following rules:
(a) for each class of the issued shares of the capital stock of the corporation, determine the proportion of 100 that the number of shares of that class owned by that person at that time is of the total number of issued shares of that class at that time, and
(b) select the proportion determined under paragraph (a) for that person in respect of the corporation that is not less than any other proportion so determined for that person in respect of the corporation at that time,
and the proportion selected under paragraph (b), when expressed as a percentage, is that person’s direct equity percentage in the corporation at that time; (pourcentage d’intérêt direct)
equity percentage
pourcentage d’intérêt
equity percentage at any time of a person, in any particular corporation, is the total of
(a) the person’s direct equity percentage at that time in the particular corporation, and
(b) all percentages each of which is the product obtained when the person’s equity percentage at that time in any corporation is multiplied by that corporation’s direct equity percentage at that time in the particular corporation
except that for the purposes of the definition participating percentage in subsection 95(1), paragraph (b) shall be read as if the reference to “any corporation” were a reference to “any corporation other than a corporation resident in Canada”; (pourcentage d’intérêt)
relevant cost base
prix de base approprié
relevant cost base to a foreign affiliate of property at any time means the adjusted cost base to the affiliate of the property at that time or such greater amount as the taxpayer claims not exceeding the fair market value of the property at that time. (prix de base approprié)
Marginal note:Application of s. 87(8.1)
(4.1) In this section, the expressions foreign merger, predecessor foreign corporation, new foreign corporation and foreign parent corporation have the meanings assigned by subsection 87(8.1).
Marginal note:Income bonds or debentures issued by foreign affiliates
(5) For the purposes of this subdivision, an income bond or income debenture issued by a corporation (other than a corporation resident in Canada) shall be deemed to be a share of the capital stock of the corporation unless any interest or other similar periodic amount paid by the corporation on or in respect of the bond or debenture was, under the laws of the country in which the corporation was resident, deductible in computing the amount for the year on which the corporation was liable to pay income or profits tax imposed by the government of that country.
Marginal note:Where rights or shares issued, acquired or disposed of to avoid tax
(6) For the purposes of this subdivision (other than section 90),
(a) where any person or partnership has a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently, to, or to acquire, shares of the capital stock of a corporation or interests in a partnership and
(i) it can reasonably be considered that the principal purpose for the existence of the right is to cause 2 or more corporations to be related for the purpose of paragraph 95(2)(a), those corporations shall be deemed not to be related for that purpose, or
(ii) it can reasonably be considered that the principal purpose for the existence of the right is to permit any person to avoid, reduce or defer the payment of tax or any other amount that would otherwise be payable under this Act, those shares or partnership interests, as the case may be, are deemed to be owned by that person or partnership; and
(b) where a person or partnership acquires or disposes of shares of the capital stock of a corporation or interests in a partnership, either directly or indirectly, and it can reasonably be considered that the principal purpose for the acquisition or disposition is to permit a person to avoid, reduce or defer the payment of tax or any other amount that would otherwise be payable under this Act, that acquisition or disposition is deemed not to have taken place, and where the shares or partnership interests were unissued by the corporation or partnership immediately before the acquisition, those shares or partnership interests, as the case may be, are deemed not to have been issued.
Marginal note:Stock dividends from foreign affiliates
(7) For the purposes of this subdivision and subsection 52(3), the amount of any stock dividend paid by a foreign affiliate of a corporation resident in Canada shall, in respect of the corporation, be deemed to be nil.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- R.S., 1985, c. 1 (5th Supp.), s. 95
- 1994, c. 7, Sch. II, s. 71, c. 21, s. 43
- 1995, c. 21, ss. 32, 46, 78
- 1998, c. 19, ss. 122, 305
- 1999, c. 22, s. 25
- 2001, c. 17, s. 73
- Date modified: