Income Tax Act — I-3.3 18.4
that (I) deal at arm’s length with the affiliate, and (II) have a substantial market presence in the particular country; and (c) does not arise under, or in connection with, a structured arrangement. ( paiement compensatoire (courtier) exonéré ) financial instrument means (a) a debt; (b) an equity interest or any right that may reasonably be considered to replicate a right to participate in profits or gain of any entity; or (c) any other arrangement that gives rise to an equity or financing return. ( instrument financier ) foreign expense restriction rule means a provision under the tax laws of a country other than Canada that can reasonably be considered to (a) have an effect, or be intended to have an effect, that is substantially similar to subsection 18(4) or 18.2(2); or (b) have been enacted or otherwise brought into effect by the country with the intention of implementing, in whole or in part, (i) any of the recommendations set out in Limiting Base Erosion Involving Interest Deductions and Other Financial Payments, Action 4 – 2016 Update , published by the Organisation for Economic Co-operation and Development, or (ii) the Global Anti-Base Erosion Model Rules set out in Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two) , published by the Organisation for Economic Co-operation and Development. ( règle étrangère de restriction des dépenses ) foreign hybrid mismatch rule means a provision, under the tax laws of a country other than Canada, that can reasonably be considered to (a) have an effect that is substantially similar to that of a provision under this section, section 12.7 or subsection 113(5); or (b) have been enacted or otherwise brought into effect by the country with the intention of implementing, in whole or in part, Neutralising the Effects of Hybrid Mismatch Arrangements, Action 2 – 2015 Final Report published by the Organisation for Economic Co-operation and Development, as amended from time to time. ( règle étrangère d’asymétrie hybride ) foreign ordinary income , of an entity for a foreign taxation year in respect of a payment, means an amount that is determined by the formula A − B − C − D − E − F where A is an amount (referred to in this definition as the “relevant amount”) that is included in respect of the payment in computing relevant foreign income or profits of the entity for the year (other than income or profits in respect of which the entity is subject to a tax substantially similar to tax under Part XIII, or a tax under a controlled foreign company tax regime or a specified minimum tax regime) because the entity is a recipient of the payment or has a direct or indirect equity interest in a recipient of the payment; B is (a) if the relevant amount is included in computing relevant foreign income or profits in respect of which the entity is subject to an income or profits tax that is charged at a nil rate, the relevant amount, or (b) in any other case, nil; C is any portion of the relevant amount that is included in computing relevant foreign income or profits of the entity for the year because of any foreign hybrid mismatch rule (other than any rule that is substantially similar in effect to subsection 113(5)); D is any portion of the relevant amount that can reasonably be considered to be excluded, reduced, offset or otherwise effectively sheltered from income or profits tax by reason of any exemption, exclusion, deduction, credit (other than a credit for tax payable under Part XIII) or other form of relief that (a) applies specifically in respect of all or a portion of the relevant amount and not in computing the entity’s relevant foreign income or profits in general, or (b) arises in respect of the payment; E is the amount determined by the formula (A − C − D) × G ÷ H where G is the total of all amounts, each of which is an amount that (i) meets the following conditions: (A) is repaid or repayable in respect of income or profits tax