Income Tax Regulations — (a)
exempt surplus , of a foreign affiliate (in this definition referred to as the “subject affiliate”) of a corporation in respect of the corporation, at any particular time, means the amount determined by the following formula in respect of the period that begins with the latest of the following times and that ends with the particular time: (a) the first day of the taxation year of the subject affiliate in which it last became a foreign affiliate of the corporation, (b) the last time for which the opening exempt surplus of the subject affiliate in respect of the corporation was required to be determined under section 5905, and (c) the last time for which the opening exempt deficit of the subject affiliate in respect of the corporation was required to be determined under section 5905 A – B where A is the total of all amounts, in respect of the period, each of which is (i) the opening exempt surplus, if any, of the subject affiliate in respect of the corporation as determined under section 5905, at the time established in paragraph (b), (ii) the exempt earnings of the subject affiliate for any of its taxation years ending in the period, (iii) the portion of any dividend received in the period and before the particular time by the subject affiliate from another foreign affiliate of the corporation (including, for greater certainty, any dividend deemed under subsection 5905(7) to have been received by the subject affiliate) that was prescribed under paragraph 5900(1)(a) to have been paid out of the payer affiliate’s exempt surplus in respect of the corporation to the extent that it (A) does not give rise to the application of subsection 12.7(3) of the Act in computing the foreign accrual property income of a foreign affiliate of a taxpayer, and (B) is excluded in computing the subject affiliate’s foreign accrual property income because of subparagraph (b)(i) or (ii) of the description of A, or because an amount is determined for H, in the definition foreign accrual property income in subsection 95(1) of the Act, (iv) the portion of any income or profits tax refunded by or the amount of a tax credit paid by the government of a country to the subject affiliate that can reasonably be regarded as having been refunded or paid in respect of any amount referred to in subparagraph (iii) and that was not deducted in determining any amount referred to in subparagraph (iii) of the description of B, (v) the portion of any taxable dividend received in the period and before the particular time by the subject affiliate that would, if the dividend were received by the corporation, be deductible by it under section 112 of the Act, (vi) an amount added to the exempt surplus of the subject affiliate or deducted from its exempt deficit in the period and before the particular time under subsection (1.092), (1.1) or (1.2), (vi.1) each amount that is required, under section 5905, to be included under this subparagraph in the period and before the particular time, or (vii) an amount added, in the period and before the particular time, to the exempt surplus of the subject affiliate under paragraph (7.1)(d) (as that paragraph applied to dividends paid on or before August 19, 2011), and B is the total of those of the following amounts that apply in respect of the period: (i) the opening exempt deficit, if any, of the subject affiliate in respect of the corporation as determined under section 5905, at the time established in paragraph (c), (ii) the exempt loss of the subject affiliate for any of its taxation years ending in the period, (iii) the portion of any income or profits tax paid to the government of a country by the subject affiliate that can reasonably be regarded as having been paid in respect of any amount referred to in subparagraph (iii), (iv) or (v) of the description of A, (iv) the portion of any whole dividend paid by the subject affiliate in the period and before the particular time deemed by paragraph 5901(1)(a) to have been paid out of the s