Income Tax Act — I-3.3 (a)
foreign accrual property income of a foreign affiliate of a taxpayer, for any taxation year of the affiliate, means the amount determined by the formula (A + A.1 + A.2 + B + C) – (D + E + F + F.1 + G + H) where A is the amount that would, if section 80 did not apply to the affiliate for the year or a preceding taxation year, be the total of all amounts, each of which is the affiliate’s income for the year from property, the affiliate’s income for the year from a business other than an active business or the affiliate’s income for the year from a non-qualifying business of the affiliate, in each case that amount being determined as if each amount described in clause (2)(a)(ii)(D) that was paid or payable, directly or indirectly, by the affiliate to another foreign affiliate of the taxpayer or of a person with whom the taxpayer does not deal at arm’s length were nil where an amount in respect of the income derived by the other foreign affiliate from that amount that was paid or payable to it by the affiliate was added in computing its income from an active business, other than (a) interest that would, by virtue of paragraph 81(1)(m), not be included in computing the income of the affiliate if it were resident in Canada, (b) a dividend from another foreign affiliate of the taxpayer, (i) if that other affiliate is resident in the same country as the affiliate, or (ii) to the extent that the amount of the dividend exceeds the amount that would be the deduction/non-inclusion mismatch arising from the dividend under paragraph 18.4(7)(c) if (A) subsection 18.4(6) were read without reference to its paragraph (a) and subparagraph (i) of the description of D in its paragraph (b), and (B) the amount determined for C in the definition foreign ordinary income in subsection 18.4(1) were deemed to be nil, (c) a taxable dividend to the extent that the amount thereof would, if the dividend were received by the taxpayer, be deductible by the taxpayer under section 112, or (d) any amount included because of subsection 80.4(2) in the affiliate’s income in respect of indebtedness to another corporation that is a foreign affiliate of the taxpayer or of a person resident in Canada with whom the taxpayer does not deal at arm’s length, A.1 is twice the total of all amounts included in computing the affiliate’s income from property or businesses (other than active businesses) for the year because of subsection 80(13), A.2 is the amount determined for G in respect of the affiliate for the preceding taxation year, B is the total of all amounts each of which is the portion of the affiliate’s income (to the extent that the income is not included under the description of A) for the year, or of the affiliate’s taxable capital gain for the year that can reasonably be considered to have accrued after its 1975 taxation year, from a disposition of property (a) that is not, at the time of disposition, excluded property of the affiliate, or (b) that is, at the time of disposition, excluded property of the affiliate, if any of paragraphs (2)(c), (d) and (d.1), subparagraph (2)(e)(i) and paragraph 88(3)(a) applies to the disposition, C is, where the affiliate is a controlled foreign affiliate of the taxpayer, the amount that would be required to be included in computing its income for the year if (a) subsection 94.1(1) were applicable in computing that income, (b) the words “earned directly by the taxpayer” in that subsection were replaced by the words “earned by the person resident in Canada in respect of whom the taxpayer is a foreign affiliate”, (c) the words “other than a controlled foreign affiliate of the taxpayer or a prescribed non-resident entity” in paragraph 94.1(1)(a) were replaced by the words “other than a prescribed non-resident entity or a controlled foreign affiliate of a person resident in Canada of whom the taxpayer is a controlled foreign affiliate”, and (d) the words “other than a capital gain” in paragraph 94.1(1)(g) were replaced by the words “