Income Tax Act — I-3.3 212.3
Foreign affiliate dumping — conditions for application 212.3 (1) Subsection (2) applies to an investment in a non-resident corporation (in this section referred to as the “subject corporation”) made at any time (in this section referred to as the “investment time”) by a corporation resident in Canada (in this section referred to as the “CRIC”) if (a) the subject corporation is immediately after the investment time, or becomes as part of a transaction or event or series of transactions or events that includes the making of the investment, a foreign affiliate of (i) the CRIC, or (ii) a corporation that does not deal at arm’s length with the CRIC (if the condition in this paragraph is satisfied because of this subparagraph and not because of subparagraph (i), such a corporation is referred to in paragraph (b) as an “other Canadian corporation”); (b) the CRIC or an other Canadian corporation is immediately after the investment time, or becomes after the investment time and as part of a transaction or event or series of transactions or events that includes the making of the investment, controlled by one non-resident person or, if no single non-resident person controls the CRIC, by a group of non-resident persons not dealing with each other at arm’s length (in this section, that one non-resident person, or each member of the group of non-resident persons, as the case may be, is referred to as a “parent”, and the group of non-resident persons, if any, is referred to as the “group of parents”), and any of the following conditions is satisfied: (i) if, at the investment time, a parent owned all shares of the capital stock of the CRIC and the other Canadian corporation, if applicable, that are owned — determined without reference to paragraph (25)(b) in the case of partnerships referred to in this subparagraph and as if all rights referred to in paragraph 251(5)(b), of the parent, each person that does not deal at arm’s length with the parent and all of those partnerships, were immediate and absolute and the parent and each of the other persons and partnerships had exercised those rights at the investment time — by the parent, persons that are not dealing at arm’s length with the parent and partnerships of which the parent or a person that is not dealing at arm’s length with the parent is a member (other than a limited partner within the meaning assigned by subsection 96(2.4)), the parent would own shares of the capital stock of the CRIC or the other Canadian corporation that (A) give the holders of those shares 25% or more of all of the votes that could be cast at any annual meeting of the shareholders in respect of all shares of the capital stock of the CRIC or the other Canadian corporation, as the case may be, or (B) have a fair market value of 25% or more of the fair market value of all of the issued and outstanding shares of the capital stock of the CRIC or the other Canadian corporation, as the case may be, (ii) the investment is an acquisition of shares of the capital stock of a subject corporation by a CRIC to which this subparagraph applies because of subsection (19), or (iii) under an arrangement entered into in connection with the investment, a person or partnership, other than the CRIC or a person related to the CRIC, has in any material respect the risk of loss or opportunity for gain or profit in respect of a property that can reasonably be considered to relate to the investment; and (c) neither subsection (16) nor (18) applies in respect of the investment. Foreign affiliate dumping — consequences (2) If this subsection applies to an investment in a subject corporation made by a CRIC, (a) for the purposes of this Part and subject to subsections (3) and (7), the CRIC is deemed to have paid to each parent, and each parent is deemed to have received from the CRIC, at the dividend time, a dividend in an amount determined by the formula A × B/C where A is the total of all amounts each of which is the portion of the fair market