{"id":1048,"date":"2014-02-03T16:51:18","date_gmt":"2014-02-03T16:51:18","guid":{"rendered":"https:\/\/thor.ca\/\/blog\/?p=1048"},"modified":"2014-02-03T16:51:18","modified_gmt":"2014-02-03T16:51:18","slug":"canco-seconding-it-employees-to-foreign-affiliate-could-generate-fapi","status":"publish","type":"post","link":"https:\/\/www.thor.ca\/blog\/2014\/02\/canco-seconding-it-employees-to-foreign-affiliate-could-generate-fapi\/","title":{"rendered":"Canco seconding it employees to foreign affiliate could generate FAPI"},"content":{"rendered":"<p>In <a href=\"http:\/\/thor.ca\/blog\/wp-content\/uploads\/2014\/02\/2013-0474431E5.pdf\">2013-0474431E5<\/a>, a Canadian parent company (Canco) seconded employees to its foreign affiliate (FA).\u00a0 The seconded employees represented 5% of the FA\u2019s workforce engaged in providing services to arm\u2019s length customers.\u00a0 The FA reimbursed Canco the cost of its seconded employees plus a 25% mark-up. The CRA confirmed that Canco would be viewed as providing a service to the FA, such that 5% of the FA\u2019s income would be considered \u201cforeign accrual property income\u201d (FAPI) under s. 95(2)(b)(ii).\u00a0 Such FAPI would be taxed in Canco on a current basis.\u00a0 The CRA also confirmed that this result could be avoided where the FA merely reimburses Canco\u2019s costs without any mark-up, but <i>only<\/i><br \/>\nif such cost-recovery represents an arm\u2019s length fee under Canada\u2019s transfer pricing rule in s. 247.\u00a0 In such event, the activities of the seconded employees would <i>not<\/i> be considered part of Canco\u2019s business. However, if s. 247 applies to <i>impute<\/i> a profit element to Canco (under applicable transfer pricing principles), the FAPI result would be the same as if Canco actually charged a mark-up.\u00a0 In other words, where Canco actually earns a profit or is deemed to earn a profit (under transfer pricing principles), Canco would be viewed a providing a service to the FA such that s. 95(2)(b)(ii) would apply to treat 5% of the FA\u2019s service income as FAPI.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In <a href=\"http:\/\/thor.ca\/blog\/wp-content\/uploads\/2014\/02\/2013-0474431E5.pdf\">2013-0474431E5<\/a>, a Canadian parent company (Canco) seconded employees to its foreign affiliate (FA).\u00a0 The seconded employees represented 5% of the FA\u2019s workforce engaged in providing services to arm\u2019s length customers.\u00a0 The FA reimbursed Canco the cost of its&hellip;<\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-1048","post","type-post","status-publish","format-standard","hentry","category-corporate-tax"],"_links":{"self":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/1048","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/comments?post=1048"}],"version-history":[{"count":0,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/1048\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/media?parent=1048"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/categories?post=1048"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/tags?post=1048"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}