Income Tax Act — I-3.3 212
ution or a hospital if repayment of the principal amount of the obligation and payment of the interest is to be made, or is guaranteed, assured or otherwise specifically provided for or secured by the government of a province; (b) interest that is paid or payable on a mortgage, hypothecary claim or similar debt obligation secured by, or on an agreement for sale or similar obligation with respect to, real property situated outside Canada or an interest in any such real property, or to immovables situated outside Canada or a real right in any such immovable, except to the extent that the interest payable on the obligation is deductible in computing the income of the payer under Part I from a business carried on by the payer in Canada or from property other than real or immovable property situated outside Canada; (c) interest that is paid or payable to a prescribed international organization or agency; or (d) an amount paid or payable or credited under a securities lending arrangement, or a specified securities lending arrangement, that is deemed by subparagraph 260(8)(a)(i) to be a payment made by a borrower to a lender of interest, if the arrangement is a fully collateralized arrangement, and (i) the following conditions are met: (A) the arrangement was entered into by the borrower in the course of carrying on a business outside Canada, and (B) the security that is transferred or lent to the borrower under the arrangement is described in paragraph (b) of the definition qualified security in subsection 260(1) and issued by a non-resident issuer, (ii) the security that is transferred or lent to the borrower under the arrangement is described in paragraph (c) of the definition qualified security in subsection 260(1), or (iii) the security that is transferred or lent to the borrower under the arrangement is described in paragraph (a) or (b). ( intérêts entièrement exonérés ) participating debt interest means interest (other than interest described in any of paragraphs (b) to (d) of the definition fully exempt interest ) that is paid or payable on an obligation, other than a prescribed obligation, all or any portion of which interest is contingent or dependent on the use of or production from property in Canada or is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation. ( intérêts sur des créances participatives ) Back-to-back loan arrangement (3.1) Subsection (3.2) applies at any time in respect of a taxpayer if (a) the taxpayer pays or credits a particular amount at that time as, on account or in lieu of payment of, or in satisfaction of, interest (determined without reference to paragraph 18(6.1)(b) and subsection 214(16)) in respect of a particular debt or other obligation to pay an amount to a person or partnership (in this subsection and subsection (3.2) referred to as the immediate funder ); (b) the immediate funder is not (i) a person resident in Canada that does not deal at arm’s length with the taxpayer, or (ii) a partnership each member of which is a person described in subparagraph (i); (c) at any time in the period during which the interest accrued (in this subsection and subsections (3.2) and (3.3) referred to as the relevant period ), a relevant funder, in respect of a particular relevant funding arrangement, (i) has an amount outstanding as or on account of a debt or other obligation to pay an amount to a person or partnership that meets any of the following conditions: (A) recourse in respect of the debt or other obligation is limited in whole or in part, either immediately or in the future and either absolutely or contingently, to a relevant funding arrangement, or (B) it can reasonably be concluded that all or a portion of the particular relevant funding arrangement was entered into, or was permitted to remain in effect, because (I) all or a portio