Income Tax Regulations — 5907
5907 (1) For the purposes of this Part, active business has the meaning assigned by subsection 95(1) of the Act; ( entreprise exploitée activement ) controlled foreign affiliate has the meaning assigned by subsection 95(1) of the Act; ( société étrangère affiliée contrôlée ) designated person or partnership , in respect of a taxpayer at any time, means (a) the taxpayer, (b) a person or partnership that is at that time (i) a person (other than a partnership) that does not, at that time, deal at arm’s length with the taxpayer, or (ii) a partnership a member of which is, at that time, a designated person or partnership in respect of the taxpayer under this definition, and (c) if a foreign affiliate of the taxpayer is an original corporation that undergoes a division in respect of which subsection 15(1.5) of the Act applies, a new corporation in respect of the division; ( personne ou société de personnes désignée ) earnings of a foreign affiliate of a taxpayer resident in Canada for a taxation year of the affiliate from an active business means (a) in the case of an active business carried on by it in a country, (i) the income or profit from the active business for the year computed in accordance with the income tax law of the country in which the affiliate is resident, in any case where the affiliate is required by that law to compute that income or profit, (ii) the income or profit from the active business for the year computed in accordance with the income tax law of the country in which the business is carried on, in any case not described in subparagraph (i) where the affiliate is required by that law to compute that income or profit, and (iii) in any other case, the amount that would be the income from the active business for the year under Part I of the Act if the business were carried on in Canada, the affiliate were resident in Canada and the Act were read without reference to subsections 12.7(3), 18(4), 18.2(2), 18.4(4), 80(3) to (12), (15) and (17) and 80.01(5) to (11) and sections 80.02 to 80.04, adjusted in each case in accordance with subsections (2), (2.1), (2.2) and (2.9) and, for the purpose of this Part, to the extent that the earnings of an affiliate from an active business carried on by it cannot be attributed to a permanent establishment in any particular country, they shall be attributed to the permanent establishment in the country in which the affiliate is resident and, if the affiliate is resident in more than one country, to the permanent establishment in the country that may reasonably be regarded as the affiliate’s principal place of residence, and (b) in any other case, the total of all amounts each of which is an amount of income that would be required under paragraph 95(2)(a) or subsection 95(2.44) of the Act to be included in computing the affiliate’s income or loss from an active business for the year if that income were computed taking into account the rules in subsection (2.03); ( gains ) exempt deficit of a foreign affiliate of a corporation in respect of the corporation at any time means the amount, if any, by which (a) the total of all amounts each of which is an amount determined at that time under any of subparagraphs (i) to (vi) of the description of B in the definition exempt surplus in this subsection exceeds (b) the total of all amounts each of which is an amount determined at that time under any of subparagraphs (i) to (vii) of the description of A in that definition; ( déficit exonéré ) exempt earnings , of a particular foreign affiliate of a particular corporation for a taxation year of the particular affiliate, means, subject to subsection (2.02), the total of all amounts each of which is (a) the amount by which the capital gains of the particular affiliate for the year (other than capital gains included in computing the amount, at any time in the year, of the particular affiliate’s hybrid surplus, or hybrid deficit, in respect of the particular corporation) exceed the total of (i) t