Income Tax Act — I-3.3 (a)
foreign accrual business income , of a foreign affiliate of a taxpayer, for any taxation year of the affiliate, means the amount that would be its foreign accrual property income for the year if that amount were determined (a) taking into consideration only amounts that (i) would not be included in the computation of the affiliate’s aggregate investment income (as defined in subsection 129(4)) if (A) the affiliate were, at all times, a Canadian-controlled private corporation, and (B) all amounts that were included in the computation of the affiliate’s foreign accrual property income for the taxation year were from a source in Canada, and (ii) are not derived from an amount paid or payable, directly or indirectly, by a person or partnership (in this definition referred to as the “payer”) to the affiliate or to a partnership of which the affiliate was a member where (A) the payer is (I) a Canadian-controlled private corporation or a substantive CCPC, (II) a corporation carrying on a personal services business, (III) an individual resident in Canada, (IV) a foreign affiliate (in this definition referred to as the “payer affiliate”) of 1 any taxpayer of whom the affiliate is a foreign affiliate, or 2 another taxpayer who does not deal at arm’s length with the affiliate or any taxpayer of whom the affiliate is a foreign affiliate, or (V) a partnership, if any person that is a member of the partnership, directly or indirectly through one or more partnerships, is described in any of subclauses (I) to (IV) (each of which is referred to in this definition as a “relevant member”), (B) if the payer – or where subclause (A)(V) applies, a relevant member – is a person described in any of subclauses (A)(I) to (IV), the payer or relevant member (I) is a taxpayer of whom the affiliate is a foreign affiliate, or (II) does not deal at arm’s length with 1 the affiliate, or 2 any taxpayer of whom the affiliate is a foreign affiliate, and (C) the amount paid or payable (I) if the payer or a relevant member is a person described in subclause (A)(I), is deductible in computing the aggregate investment income or reduces the tax otherwise payable under section 123.3 for a taxation year of the payer or the relevant member, as the case may be, (II) if the payer or a relevant member is a person described in subclause (A)(II) or (III), is deductible in computing the income for a taxation year of the payer or the relevant member, as the case may be, and (III) if the payer or a relevant member is a person described in subclause (A)(IV), is deductible in computing the foreign accrual property income, other than foreign accrual business income, for a taxation year of the payer affiliate or the relevant member, as the case may be; and (b) on the basis that (i) sections 5903 and 5903.1 of the Income Tax Regulations were applied, in the manner set out in subparagraph (ii), taking into account only amounts described in paragraph (a), and (ii) the total of the prescribed amounts for the year under subsections 5903(1) and 5903.1(1) of the Income Tax Regulations were the lesser of (A) the affiliate’s foreign accrual property income for the year determined taking into account only amounts described under paragraph (a) and without regard to any amount determined for F and F.1 in the formula in the definition foreign accrual property income in subsection 95(1) for the year, and (B) the total of the maximum amounts permitted to be designated under subsections 5903(1) and 5903.1(1) of the Income Tax Regulations for the year. ( revenu étranger accumulé, tiré d’une entreprise)