Paragraph 95(2)(a) (historical)
Administrative Policy
14 July 1995 T.I. 950977 (C.T.O. "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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Investment Business | 132 |
24 May 1994 T.I. 940646 (C.T.O. "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)...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(2) - Paragraph 5907(2)(j) | 109 |
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....
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(2) - Paragraph 5907(2)(j) | 31 |
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...
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...
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...
Articles
Chapman, "Foreign Affiliate Amendments: Three Strikes and you are Done", 1995 Canadian Tax Journal, Vol. 43, No. 2, p. 433.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(l) | 0 |
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(c) | rollover is available on the drop-down of shares into a Dutch cooperative in consideration for a credit to the membership account | 501 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Corporation | Dutch cooperative whose articles limited member liability was a corp | 264 |
| Tax Topics - Income Tax Act - Section 93.2 - Subsection 93.2(2) | membership interest in Dutch cooperative ruled to be shares | 92 |
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....
Excluded Property
Administrative Policy
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...
| 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...
| 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,...
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%...
21 September 2007 External T.I. 2007-0251651E5
A Canadian resident individual owns 100% of a corporation ("FA") resident in the Netherlands which, in turn, has an interest in a partnership, all...
1 November 2000 External T.I. 1999-000972
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...
| 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) | 101 |
6 January 1999 T.I. 982978
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...
| 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) | 70 |
10 March 1998 T.I. 980489
Where a grandchild foreign factoring subsidiary acquires substantially all its trade receivables from a foreign subsidiary of the taxpayer that...
22 December 1997 T.I. 970977
Intangible property that is capital property and that is used by a controlled foreign affiliate principally in producing deemed active business...
18 June 1996 External T.I. 18 June 1996 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...
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)
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....
Foreign Accrual Property Income
See Also
A.G. Canada v. Le Groupe Jean Coutu (PJC) Inc., 2015 QCCA 838, SCC docket 36505, aff'd 2016 SCC 56
The taxpayer implemented a plan, to neutralize the effect of FX fluctuations on its investment in a U.S. sub, that overlooked FAPI considerations...
| 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 | 242 |
Rostland Corp. v. The Queen, [1995] 2 CTC 2276 (TCC)
Two indirect wholly-owned foreign subsidiaries of the taxpayer ("Texas" and "BV") held non-recourse promissory notes of an arm's length...
Canada Trustco Mortgage Co. v. MNR, 91 DTC 1312 (TCC)
The taxpayer's Netherlands subsidiary, whose income was derived from Canadian mortgages which it had purchased from, and were administered by, its...
Alexander Cole Ltd. v. MNR, 90 DTC 1894 (TCC)
A wholly-owned U.S. subsidiary of the taxpayer, which had been engaged (through U.S. limited partnerships) in commercial real estate projects,...
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 ......
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 129 - Subsection 129(4) - Canadian Investment Income | 52 |
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...
| 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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | 148 | |
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(g.1) | 37 |
26 March 2004 External T.I. 2003-004706
Where a foreign affiliate earns foreign accrual property income (rental income) of U.S.$50,000 throughout a year, the average exchange rate for...
27 November 1998 T.I. 982283
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....
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1) - Underlying Foreign Tax | 68 |
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...
| 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...
Articles
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...
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...
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.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | 0 | |
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(g.1) | 0 |
Melanie Huynh, Eric Lockwood, "Foreign Accrual Property Income: A Practical Perspective", International Tax Planning, 2000 Canadian Tax Journal, Vol. 48, No. 3, p. 752.
Foreign Accrual Tax
Administrative Policy
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...
| 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%...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 126 - Subsection 126(7) - Business-Income Tax | 130 | |
| Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1) - Earnings | tax imposed on revenue rather than income | 118 |
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Dividend | 82 | |
| Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1.3) | 260 |
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...
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)...
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... |
5 June 1996 T.I. 961803 (C.T.O. "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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1) - Paragraph 5907(1)(l) | 31 |
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...
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
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...
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 212 - Paragraph 212(3.1)(c) | 190 | |
| Tax Topics - Income Tax Act - Section 212 - Paragraph 212(3.1)(d) | 66 |
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...
Foreign Affiliate
Administrative Policy
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...
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...
| 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 2004-010311
Ruling that a U.S. LLC would be considered a corporation, that the ownership interest of a member would be considered shares, and that...
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...
27 June 1994 T.I. 940600 (C.T.O. "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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Corporation | 29 | |
| Tax Topics - Income Tax Act - Section 250 - Subsection 250(5) | 96 | |
| Tax Topics - Treaties - Article 4 | 67 |
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...
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Corporation | 23 |
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...
Foreign Bank
See Also
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,...
| 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...
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Specified Investment Business | actively-manged holiday property an investment | 385 |
Indema Ltd. v. The Queen, 92 DTC 6244 (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...
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...
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...
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...
24 August 1999 T.I. 9701345
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...
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...
13 November 1997 T.I. 972253
In a situation where a foreign affiliate develops resource property and derives profits from the disposition of such resource properties once...
10 November 1997 T.I. 971117
An International Business Corporation incorporated in Barbados whose business consisted solely of marketing and the collection of receivables...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(11.2) | 59 |
10 November 1997 T.I. 972226
If a commissionaire through whom a foreign affiliate did business was merely an agent, the foreign affiliate would be considered to be doing...
22 September 1997 T.I. 964161
Regarding a foreign affiliate of a Canadian corporation that was in the business of buying and selling natural gas and that hedged uncovered...
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...
14 July 1995 T.I. 950977 (C.T.O. "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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Paragraph 95(2)(a) (historical) | 103 |
28 June 1995 T.I. 9505615
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...
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...
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...
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...
31 October 1995 T.I. 9526255
Two foreign affiliates (Aco and Bco) each carries on the business of real estate development and employ individuals in the active conduct of that...
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.
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...
| 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...
| 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) | extends to arm's length acquisition/deemed ECE respecting licensed IP | 576 |
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...
28 January 2008 External T.I. 2005-0165131E5
The taxation year of a foreign affiliate, for FAPI and surplus account computation purposes, should generally, be the same as the taxation year...
12 July 2000 External T.I. 2000-003677
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...
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. 2000-003735
An Alberta trust company that offers services to the public as executor, administrator, trustee, bailee etc. and is not authorized to carry on a...
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...
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...
| 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...
2007 May 16, CLHIA Roundtable Q. 19, 2007-0229841C6
FA1 enters into insurance or reinsurance contracts in the course of carrying on an active business outside Canada, and reinsures the risk...
9 January 2001 External T.I. 1999-001140
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...
26 October 2000 Internal T.I. 2000-0044387
A U.S. controlled foreign affiliate ("USco") of Canco provides management services to various wholly-owned subsidiaries ("Landcos") resident in...
2 September 1999 TI 9622545 [resource group mananagementco did not have resource business]
FA3 has six full time employees who provide geological and administrative services to FA1 and FA2, which are developing resource properties and...
24 August 1999 T.I. 9701345 [one development project held though subsidiary]
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...
5 February 1997 T.I. 9611725 [notional excess cash of mothership not used in its business]
A foreign affiliate ("FA") factors receivables of only one client ("Manco"), a related foreign affiliate. The income of FA derived directly from...
21 May 1996 T.I. 9526865
Discussion of the application of the "directly or indirectly" test where a loan made by a foreign affiliate of Canco ("FA") to a related...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(6) - Paragraph 95(6)(b) | 55 |
11 October 1996 APFF Roundtable Q. 1.5 7M12910
A Finance representative stated:
When it is established that the business conducted by the affiliate is a business carried on actively, certain...
16 August 1995 T.I. 952123 (C.T.O. "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...
16 December 1993 T.I. 932563 (C.T.O. "6363-1 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...
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 160 - Subsection 160(1) | 849 | |
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(2) | 1682 |
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...
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(g) | 12 |
Subparagraph 95(2)(a)(ii)
Clause 95(2)(a)(ii)(B)
Administrative Policy
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...
| 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,...
| 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...
| 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...
| 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...
| 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) | extends to arm's length acquisition/deemed ECE respecting licensed IP | 576 |
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...
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...
2004 Ruling 2004-010311
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 113 - Subsection 113(1) | 33 | |
| Tax Topics - Income Tax Act - Section 2 - Subsection 2(1) | 34 | |
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Affiliate | 33 |
25 October 2002 Internal T.I. 2002-014997
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...
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...
| 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) | 109 |
10 October 2000 External T.I. 2000-005038
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...
6 January 1999 T.I. 982978
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property | 70 |
7 August 1996 T.I. 9605735
After being referred to an arrangement under which a foreign affiliate ("Forco"), which has made a loan to a related foreign subsidiary ("Xco"),...
1 February, 1996 T.I. 951744 (C.T.O. "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...
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...
25 April 1995 T.I. 942987 "C.T.O. 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...
Articles
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | 401 |
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...
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...
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.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 85.1 - Subsection 85.1(3) | 0 | |
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Investment Business | 0 |
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
Clause 95(2)(a)(ii)(D)
Administrative Policy
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...
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...
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?]...
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...
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...
| 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) | 115 |
2002 Ruling 2002-0138993
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 84 - Subsection 84(3) | 139 |
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...
1 November 2000 External T.I. 1999-000972
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Excluded Property | 155 |
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...
14 May 1997 T.I. 960535
General discussion of s. 95(2)(a)(ii)(D)(v).
5 February 1997 T.I. 963562 (C.T.O. "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...
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....
Articles
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...
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...
Paragraph 95(2)(a.1)
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,...
| 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...
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...
Paragraph 95(2)(a.3)
Administrative Policy
21 May 1997 T.I. 970795
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...
Paragraph 95(2)(b)
Administrative Policy
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...
| 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...
| 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 |
2002 Tax Executives Institute Roundtable Q. 14, 2002-017395
S.95(2)(b) would apply where a Canadian subsidiary of a Canadian financial institution, which provides management services to pension funds but is...
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...
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...
Sandra Jack, "FAPI: The Goods on Goods", Canadian Tax Highlights, Vol. 9, No. 12, 27 December 2001.
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,...
| 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 | 264 |
| 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 |
26 May 2016 IFA Roundtable Q. 10, 2016-0642101C6 - 93.2 & 95(2)(c)
FA1 transfers all of its shares of FA2 to another non-resident subsidiary of FA1, viz., a non-share corporation (“FA3”), as a capital...
| 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 | 262 |
Articles
Schwartz, "Tax-Free Reorganizations of Foreign Affiliates", 1984 Canadian Tax Journal, November-December 1984, p. 1039.
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...
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)
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...
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 91 - Subsection 91(4.5) | 184 | |
| Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(5) | 359 |
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.
Paragraph 95(2)(e.1)
Administrative Policy
24 March 2004 External T.I. 2003-003431
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Statutory Interpretation - Provincial Law | 70 |
24 November 1999 T.I. 991296
Where the disposing affiliate is resident in a different country than the liquidating affiliate, the exception only applies where gain or loss is...
15 December 1997 T.I. 970771
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...
Paragraph 95(2)(f)
Administrative Policy
3 December 2003 External T.I. 2003-005120
An operating grandchild subsidiary of Canco in the United States ("FA2") pays off a third-party U.S.-dollar borrowing the initial proceeds of...
16 August 2000 TI 1999 - 000961
Where a US foreign affiliate lends Deutschemarks to a German foreign affiliate, the appropriate currency to use for the purposes of determining...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(g) | 40 |
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...
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...
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.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(f.1) | 0 |
Paragraph 95(2)(f.1)
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...
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.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(f) | 0 |
Paragraph 95(2)(f.14)
Administrative Policy
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...
| 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 | deemed CFA unit trust sub of a FI subject to mark-to-market rules | 178 |
Paragraph 95(2)(g)
Administrative Policy
16 August 2000 TI 1999 - 000961
Where a US foreign affiliate had lent money to a German foreign affiliate that was denominated in Canadian dollars, a foreign currency loss...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(f) | 159 |
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.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(i) | 26 |
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | 148 | |
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Property Income | 199 |
5 December 2003 External T.I. 2002-0165195
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 53 - Subsection 53(1) - Paragraph 53(1)(c) | debt forgiveness as contribution to CFA | 100 |
| Tax Topics - Income Tax Act - Section 80 - Subsection 80(1) | 136 | |
| Tax Topics - Income Tax Act - Section 80 - Subsection 80(5) | 136 | |
| Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1) - Earnings | 63 | |
| Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(2) - Paragraph 5907(2)(f) | forgiveness gain did not relate to active business items | 123 |
Articles
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...
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.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | 0 | |
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Property Income | 0 |
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...
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...
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...
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")...
| 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...
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...
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 as...
| 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 |
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...
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....
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...
Paragraph 95(2)(l)
Articles
Chapman, "Foreign Affiliate Amendments: Three Strikes and you are Done", 1995 Canadian Tax Journal, Vol. 43, No. 2, p. 433.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Paragraph 95(2)(a) (historical) | 0 |
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...
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...
| 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...
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 17 - Subsection 17(15) - Controlled foreign affiliate | 127 | |
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(6) - Paragraph 95(6)(b) | 309 |
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.
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...
Indebtedness
Administrative Policy
20 January 1997 T.I. 963269
An interest rate swap would be a "similar agreement".
Specified Deposit
Administrative Policy
5 July 1995 T.I. 951478 (C.T.O. "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...
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...
26 June 1991 T.I. (Tax Window, No. 4, p. 4, ¶1318)
Discussion of what constitutes "Canadian risk".
Paragraph 95(3)(b)
Administrative Policy
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)...
| 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
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...
| 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 | 186 |
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 85.1 - Subsection 85.1(3) | 46 |
25 November 1998 T.I. 981001
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...
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 T.I. 990312
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...
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.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(l) | 0 |
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...
| 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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(3) | 102 |
Administrative Policy
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...
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...
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...
| 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 T.I. 9526865
Discussion of the application of the "directly or indirectly" test where a loan made by a foreign affiliate of Canco ("FA") to a related...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(i) | 55 |
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...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 17 - Subsection 17(15) - Controlled foreign affiliate | 127 | |
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(n) | 268 |
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...