Income Tax Act — I-3.3 17
ver, to or for the benefit of any person or partnership (other than an exempt loan or transfer), the non-resident person is deemed at that time to owe to the corporation an amount equal to the amount, or the portion of the amount, as the case may be, owing to the particular person or partnership. Exception to anti-avoidance rule — indirect loan (3) Subsection (2) does not apply to an amount owing at any time by a non-resident person to a particular person or partnership where (a) at that time, the non-resident person and the particular person or each member of the particular partnership, as the case may be, are controlled foreign affiliates of the corporation resident in Canada; or (b) at that time, (i) the non-resident person and the particular person are not related or the non-resident person and each member of the particular partnership are not related, as the case may be, (ii) the terms or conditions made or imposed in respect of the amount owing, determined without reference to any loan or transfer of property by a corporation resident in Canada described in paragraph (2)(b) in respect of the amount owing, are such that persons dealing at arm’s length would have been willing to enter into them at the time that they were entered into, and (iii) if there were an amount of interest payable on the amount owing at that time that would be required to be included in computing the income of a foreign affiliate of the corporation resident in Canada for a taxation year, that amount of interest would not be required to be included in computing the foreign accrual property income of the affiliate for that year. Anti-avoidance rule — loan through partnership (4) For the purpose of this section, where a non-resident person owes an amount at any time to a partnership and subsection (2) does not deem the non-resident person to owe an amount equal to that amount to a corporation resident in Canada, the non-resident person is deemed at that time to owe to each member of the partnership, on the same terms as those that apply in respect of the amount owing to the partnership, that proportion of the amount owing to the partnership at that time that (a) the fair market value of the member’s interest in the partnership at that time is of (b) the fair market value of all interests in the partnership at that time. Anti-avoidance rule — loan through trust (5) For the purpose of this section, where a non-resident person owes an amount at any time to a trust and subsection (2) does not deem the non-resident person to owe an amount equal to that amount to a corporation resident in Canada, (a) where the trust is a non-discretionary trust at that time, the non-resident person is deemed at that time to owe to each beneficiary of the trust, on the same terms as those that apply in respect of the amount owing to the trust, that proportion of the amount owing to the trust that (i) the fair market value of the beneficiary’s interest in the trust at that time is of (ii) the fair market value of all the beneficial interests in the trust at that time; and (b) in any other case, the non-resident person is deemed at that time to owe to each settlor in respect of the trust, on the same terms as those that apply in respect of the amount owing to the trust, an amount equal to the amount owing to the trust. Anti-avoidance rule — loan to partnership (6) For the purpose of this section, where a particular partnership owes an amount at any time to any person or any other partnership (in this subsection referred to as the “lender”), each member of the particular partnership is deemed to owe at that time to the lender, on the same terms as those that apply in respect of the amount owing by the particular partnership to the lender, that proportion of the amount owing to the lender that (a) the fair market value of the member’s interest in the particular partnership at that time is of (b) the fair market value of all interests in the particular partnership at that time. Ex