Income Tax Act — I-3.3 18
pect of the taxpayer, a particular non-resident person described in subparagraph (a)(i) of the definition outstanding debts to specified non-residents in subsection (5) and (A) the existence of the specified right is required under the terms and conditions of the particular debt or other obligation, or (B) it can reasonably be concluded that all or a portion of the particular amount became owing, or was permitted to remain owing, because (I) the specified right was granted, or (II) the intermediary anticipated that the specified right would be granted; and (d) the total of all amounts — each of which is, in respect of the particular debt or other obligation, an amount outstanding as or on account of an intermediary debt or the fair market value of a particular property described in subparagraph (c)(ii) — is equal to at least 25% of the total of (i) the particular amount, and (ii) the total of all amounts each of which is an amount (other than the particular amount) that the taxpayer, or a person that does not deal at arm’s length with the taxpayer, has outstanding as or on account of a debt or other obligation to pay an amount to the intermediary under the agreement, or an agreement that is connected to the agreement, under which the particular debt or other obligation was entered into if (A) the intermediary is granted a security interest in respect of a property that is the intermediary debt or the particular property, as the case may be, and the security interest secures the payment of two or more debts or other obligations that include the debt or other obligation and the particular debt or other obligation, and (B) each security interest that secures the payment of a debt or other obligation referred to in clause (A) secures the payment of every debt or other obligation referred to in that clause. Back-to-back loan arrangement (6.1) If this subsection applies at any time in respect of a taxpayer, (a) then for the purpose of applying subsections (4) and (5), (i) the portion of the particular amount, at that time, referred to in paragraph (6)(a) that is equal to the lesser of the following amounts is deemed to be an amount outstanding as or on account of a debt or other obligation to pay an amount to the particular non-resident person referred to in subparagraph (6)(c)(i) or (ii), as the case may be, and not to the intermediary: (A) the amount outstanding as or on account of the intermediary debt or the fair market value of the particular property referred to in subparagraph (6)(c)(ii), as the case may be, and (B) the proportion of the particular amount that the amount outstanding or the fair market value, as the case may be, is of the total of all amounts each of which is (I) an amount outstanding as or on account of an intermediary debt in respect of the particular debt or other obligation, owed to the particular non-resident or any other non-resident person that is, in respect of the taxpayer, described in the definition outstanding debts to specified non-residents in subsection (5), or (II) the fair market value of a particular property referred to in subparagraph (6)(c)(ii) in respect of the particular debt or other obligation, and (ii) the portion of the interest paid or payable by the taxpayer, in respect of a period throughout which subparagraph (a)(i) applies, on the particular debt or other obligation referred to in paragraph (6)(a) that is equal to the amount determined by the following formula is deemed to be paid or payable by the taxpayer to the particular non-resident, and not to the intermediary, as interest for the period on the amount deemed by subparagraph (a)(i) to be outstanding to the particular non-resident: A × B/C where A is the interest paid or payable, B is the average of all amounts each of which is an amount that is deemed by subparagraph (a)(i) to be outstanding to the particular non-resident at a time during the period, and C is the average of all amounts each of which is the particular amount