Income Tax Act — I-3.3 95
ted (A) under the laws of the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued, and under the laws of each country in which the business is carried on through a permanent establishment in that country, (B) under the laws of the country (other than Canada) in which the business is principally carried on, or (C) if the affiliate is related to a corporation, under the laws of the country under the laws of which that related corporation is governed and any of exists, was (unless that related corporation was continued in any jurisdiction) formed or organized, or was last continued, if those regulating laws are recognized under the laws of the country in which the business is principally carried on and all of those countries are members of the European Union; and (c) the terms and conditions of the sale or exchange of such property are substantially the same as the terms and conditions of similar sales or exchanges of such property by persons dealing at arm’s length. Application of paragraphs (2)(a.1) and (a.3) (2.31) Paragraphs (2)(a.1) and (a.3) do not apply to a controlled foreign affiliate (for the purposes of section 17) of an eligible Canadian bank (as defined in subsection (2.43)) in respect of activities carried out to earn income from a property, other than a specified property of the affiliate, if (a) the affiliate sells the property, or performs services as an agent in relation to a purchase or sale of the property, and it is reasonable to conclude that the cost to any person of the property is relevant in computing the income from (i) a business carried on by the bank or a person resident in Canada with whom the bank does not deal at arm’s length, or (ii) a business carried on in Canada by a non-resident person with whom the bank does not deal at arm’s length; (b) the property has a readily available fair market value and (i) is listed on a recognized stock exchange, (ii) would be a mark-to-market property (as defined in subsection 142.2(1)) of the bank if it were owned by the bank, or (iii) is a debt obligation owing by the bank that would be a mark-to-market property (as defined in subsection 142.2(1)) of the affiliate if (A) the affiliate were the taxpayer referred to in that definition, and (B) the definition specified debt obligation in subsection 142.2(1) were read without reference to its paragraph (d); (c) the purchase and sale of the property by the affiliate, or services performed by the affiliate as agent in respect of the purchase or sale, are made (i) on terms and conditions that are substantially the same as the terms and conditions of similar purchases or sales of, or services performed in respect of the purchase or sale of, such property by persons dealing at arm’s length, (ii) in the course of a business (A) that regularly includes trading or dealing in securities principally with persons with whom the affiliate deals at arm’s length, and (B) that is principally carried on through a permanent establishment in a country other than Canada, and (iii) for the purpose of enabling the purchase or sale of the property by a particular person who deals at arm’s length with the affiliate and the bank; and (d) the affiliate is a foreign bank or a trader or dealer in securities and the activities of the business are regulated (i) under the laws of the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued, and under the laws of each country in which the business is carried on through a permanent establishment in that country, (ii) under the laws of the country (other than Canada) in which the business is principally carried on, or (iii) if the affiliate is related to a corporation, under the laws of the country under whose laws that related corporation is governed and any of e