Income Tax Act — I-3.3 17
e purpose of subsection (8), deemed to have been used for the purpose for which the proceeds from the previous borrowings were used or were deemed by this subsection to have been used, or to acquire the property in respect of which the unpaid purchase price was payable, as the case may be. Exception (9) Subsection (1) does not apply to a corporation resident in Canada for a taxation year of the corporation in respect of an amount owing to the corporation by a non-resident person if (a) the corporation is not related to the non-resident person throughout the period in the year during which the amount owing is outstanding; (b) the amount owing arose in respect of goods sold or services provided to the non-resident person by the corporation in the ordinary course of the business carried on by the corporation; and (c) the terms and conditions 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. Determination of whether related and controlled foreign affiliate status (10) For the purpose of this section, in determining whether persons are related to each other and whether a non-resident corporation is a controlled foreign affiliate of a corporation resident in Canada at any time, (a) each member of a partnership is deemed to own that proportion of the number of shares of a class of the capital stock of a corporation owned by the partnership at that time that (i) the fair market value of the member’s interest in the partnership at that time is of (ii) the fair market value of all interests in the partnership at that time; and (b) each beneficiary of a non-discretionary trust is deemed to own that proportion of the number of shares of a class of the capital stock of a corporation owned by the trust at that time 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. Determination of whether related (11) For the purpose of this section, in determining whether persons are related to each other at any time, each settlor in respect of a trust, other than a non-discretionary trust, is deemed to own the shares of a class of the capital stock of a corporation owned by the trust at that time. Determination of whether persons related (11.1) For the purposes of this section, in determining whether persons are related to each other at any time, any rights referred to in subparagraph 251(5)(b)(i) that exist at that time are deemed not to exist at that time to the extent that the exercise of those rights is prohibited at that time under a law of the country under the law of which the corporation was formed or last continued and is governed, that restricts the foreign ownership or control of the corporation. Back-to-back loans (11.2) For the purposes of subsection (2) and paragraph (3)(b), where a non-resident person, or a partnership each member of which is non-resident, (in this subsection referred to as the “intermediate lender”) makes a loan to a non-resident person, or a partnership each member of which is non-resident, (in this subsection referred to as the “intended borrower”) because the intermediate lender received a loan from another non-resident person, or a partnership each member of which is non-resident, (in this subsection referred to as the “initial lender”) (a) the loan made by the intermediate lender to the intended borrower is deemed to have been made by the initial lender to the intended borrower (to the extent of the lesser of the amount of the loan made by the initial lender to the intermediate lender and the amount of the loan made by the intermediate lender to the intended borrower) under the same terms and conditions and at the same time as it was made by the intermediate lender; and (b) the loan made by the initial lender to the intermediate lender and the loan made by the intermediate lender to