Income Tax Act — I-3.3 93.4
Definitions 93.4 (1) The following definitions apply in this section. FABI surplus , of a foreign affiliate (referred to in this definition as the “subject affiliate”) of a corporation at any time, means the amount that would be the subject affiliate’s taxable surplus (as defined in subsection 5907(1) of the Income Tax Regulations ) at that time if (a) the amount included in subparagraph (iii) of the description of A in the definition taxable surplus in subsection 5907(1) of the Income Tax Regulations in respect of the portion of any dividend received by the subject affiliate that is prescribed to be paid out of the taxable surplus of the foreign affiliate that paid the dividend were equal to the lesser of (i) that portion, and (ii) the proportion of the payer affiliate’s FABI surplus at the time the dividend was paid that the dividend received is of the whole dividend referred to in paragraph 5900(1)(b) of those Regulations; (b) the amount included in subparagraph (iv) of the description of B in the definition taxable surplus in subsection 5907(1) of the Income Tax Regulations in respect of any whole dividend paid by the subject affiliate were equal to the lesser of (i) the portion of the whole dividend deemed under paragraph 5901(1)(b) of those Regulations to be paid out of the subject affiliate’s taxable surplus, and (ii) the subject affiliate’s FABI surplus at that time; and (c) the only other amounts taken into consideration in determining the subject affiliate’s taxable surplus were amounts that are included in computing (i) the subject affiliate’s net earnings (as defined in subsection 5907(1) of the Income Tax Regulations ) (A) in respect of foreign accrual property income that can reasonably be considered to be attributable to its foreign accrual business income in respect of which an election has been made under subsection (2), or (B) from an active business carried on by it in a country, and (ii) the subject affiliate’s net loss (as defined in subsection 5907(1) of the Income Tax Regulations ) (A) in respect of foreign accrual property income that can reasonably be considered to be attributable to its foreign accrual business income, or (B) from an active business carried on by it in a country. ( surplus REATE ) 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 pa