In 2013-0514191R3, the CRA ruled that a non-interest bearing foreign denominated debt obligation (Debt) owed by a Canadian parent (Parent) to a related Canadian subsidiary (Sub) could be effectively eliminated through a series of steps without (i) recognizing any…
In 2013-0500891I7, the CRA’s Rulings Directorate reversed a proposed audit adjustment relating to a “drop and sell” transaction. The parent company in the group (Parent) had borrowed money for a capital purpose and purchased forward contracts to hedge this…
In 2013-0512921E5, the CRA said that 25% withholding tax (WHT) applied to a cross-border “franchise relicensing fee” under s. 212(1)(d). Subject to specific inclusions and exceptions, s. 212(1)(d) applies generally to any
“rent, royalty or similar payment” paid to…
In Lehigh Cement Limited v. The Queen, 2014 FCA 103, the Federal Court of Appeal strongly rejected the CRA’s broad interpretation of the anti-avoidance rule in s. 95(6). The Court held that the rule is narrowly targeted at a…
CRA narrowly interprets foreign affiliate income recharacterization rule. In 2012-0439661I7 (released February 5, 2014), the CRA narrowly construed the foreign affiliate income recharacterization rule in s. 95(2)(a)(i), which can operate to convert income from property (FAPI) of a foreign…
In 2013-0474431E5, a Canadian parent company (Canco) seconded employees to its foreign affiliate (FA). The seconded employees represented 5% of the FA’s workforce engaged in providing services to arm’s length customers. The FA reimbursed Canco the cost of its…
In 2013-0512581E5, a Canadian company (Canco) sold shares of a Brazilian company (BrazilCo). The resulting gain was taxed in Brazil. The CRA said a foreign tax credit (FTC) would not be available to Canco under s. 126(1) because the…
In 2013-0505911I7, the CRA concluded that “assembly project” in Article 5 of the Canada-Brazil tax treaty should have a meaning similar to “installation project”. Such terms are typically relevant to the question whether a foreign company has a taxable…
In Mckesson Canada Corporation v. The Queen, 2013 TCC 404, the Canadian company in the group (Canco) sold its trade receivables to a Luxembourg company in the group (Luxco) at a discount of 2.206% (from their face amount). In an…
In 2013-0512551I7, the CRA confirmed that Canadian GAAP governs a corporation’s retained earnings for thin capitalization purposes, not the income allocation rules for partnerships in s. 96. In broad terms, a Canadian corporation (Canco) cannot deduct interest expense on…