Income Tax Act — I-3.3 94.1
Offshore investment fund property 94.1 (1) If in a taxation year a taxpayer holds or has an interest in property (referred to in this section as an “offshore investment fund property”) (a) that is a share of the capital stock of, an interest in, or a debt of, a non-resident entity (other than a controlled foreign affiliate of the taxpayer or a prescribed non-resident entity) or an interest in or a right or option to acquire such a share, interest or debt, and (b) that may reasonably be considered to derive its value, directly or indirectly, primarily from portfolio investments of that or any other non-resident entity in (i) shares of the capital stock of one or more corporations, (ii) indebtedness or annuities, (iii) interests in one or more corporations, trusts, partnerships, organizations, funds or entities, (iv) commodities, (v) real estate, (vi) Canadian or foreign resource properties, (vii) currency of a country other than Canada, (viii) rights or options to acquire or dispose of any of the foregoing, or (ix) any combination of the foregoing, and it may reasonably be concluded, having regard to all the circumstances, including (c) the nature, organization and operation of any non-resident entity and the form of, and the terms and conditions governing, the taxpayer’s interest in, or connection with, any non-resident entity, (d) the extent to which any income, profits and gains that may reasonably be considered to be earned or accrued, whether directly or indirectly, for the benefit of any non-resident entity are subject to an income or profits tax that is significantly less than the income tax that would be applicable to such income, profits and gains if they were earned directly by the taxpayer, and (e) the extent to which the income, profits and gains of any non-resident entity for any fiscal period are distributed in that or the immediately following fiscal period, that one of the main reasons for the taxpayer acquiring, holding or having the interest in such property was to derive a benefit from portfolio investments in assets described in any of subparagraphs 94.1(1)(b)(i) to 94.1(1)(b)(ix) in such a manner that the taxes, if any, on the income, profits and gains from such assets for any particular year are significantly less than the tax that would have been applicable under this Part if the income, profits and gains had been earned directly by the taxpayer, there shall be included in computing the taxpayer’s income for the year the amount, if any, by which (f) the total of all amounts each of which is the product obtained when (i) the designated cost to the taxpayer of the offshore investment fund property at the end of a month in the year is multiplied by (ii) 1/12 of the total of (A) the prescribed rate of interest for the period that includes that month, and (B) two per cent exceeds (g) the taxpayer’s income for the year (other than a capital gain) from the offshore investment fund property determined without reference to this subsection. Definitions (2) In this section, designated cost to a taxpayer at any time in a taxation year of an offshore investment fund property that the taxpayer holds or has an interest in means the amount determined by the formula A + B + C + D where A is the cost amount to the taxpayer of the property at that time (determined without reference to paragraphs 53(1)(m) and 53(1)(q), subparagraph 53(2)(c)(i.3), paragraphs 53(2)(g) and 53(2)(g.1) and section 143.2), B is, where an additional amount has been made available by a person to another person after 1984 and before that time, whether by way of gift, loan, payment for a share, transfer of property at less than its fair market value or otherwise, in circumstances such that it may reasonably be concluded that one of the main reasons for so making the additional amount available to the other person was to increase the value of the property, the total of all amounts each of which is the amount, if any, by which such an additional amount