Income Tax Act — I-3.3 (a)
han any portion of the amount that is in respect of income tax paid under subsection 212(1)) that is deducted under subsection 91(4) in computing the taxpayer’s income for any taxation year in respect of foreign accrual tax (as defined in subsection 95(1)) applicable to an amount that is included in the taxpayer’s income under subsection 91(1) in respect of the affiliate’s relevant affiliate interest and financing revenues for the affiliate taxation year, and B is the total of all amounts, each of which is (a) an amount paid or payable by the taxpayer, or a loss or a capital loss of the taxpayer, as the case may be, under or as a result of an agreement or arrangement, to the extent that (i) the amount (A) is deductible in computing the taxpayer’s income for the year, or (B) in the case of a capital loss, reduces the amount determined under paragraph 3(b) in respect of the taxpayer or is deductible in computing the taxpayer’s taxable income for the year (except to the extent it has already been taken into account in determining an amount under this paragraph for a previous year), (ii) the agreement or arrangement is entered into (A) as a loan or other financing owing to or provided by the taxpayer, or a person or partnership that does not deal at arm’s length with the taxpayer, or (B) in relation to a loan or other financing owing to or provided by the taxpayer, or a person or partnership that does not deal at arm’s length with the taxpayer, to hedge the cost of funding or the borrowing or other financing, and (iii) the amount can reasonably be considered to reduce the return of the taxpayer, or a person or partnership that does not deal at arm’s length with the taxpayer, in respect of the loan or other financing; (b) in respect of the income or loss of a partnership, for a fiscal period that ends in the year, from any source or from sources in a particular place, an amount determined by the formula H × I where H is an amount that would be described in paragraph (a) if (i) the references to the taxpayer in that paragraph were read as references to the partnership, and (ii) the reference in subparagraph (a)(i) to “the taxpayer’s income for the year” were read as “the partnership’s income or loss from the source, or the source in a particular place, for a fiscal period”, and I is the taxpayer’s specified proportion, if the references in the definition specified proportion in subsection 248(1) to “total income or loss” were read as “income or loss from the source, or the source in a particular place”, (c) the portion of any amount included under the description of A (referred to in this paragraph as the “subject amount”) that can reasonably be considered to be excluded, reduced, offset or otherwise effectively sheltered from tax under this Part because an amount is deductible (i) under any of subsections 20(11) to (12.1) and 126(1) and (2), and (ii) in respect of income or profits tax paid to a country other than Canada that (A) can reasonably be considered to have been paid in respect of the subject amount, and (B) is not a tax substantially similar to tax under subsection 212(1), (d) the portion of any amount included under A that is not, because of an Act of Parliament, subject to tax under this Part. ( revenus d’intérêts et de financement )