Income Tax Act — I-3.3 212
e, municipality or other political subdivision, (iii) the amount of money provided to the lender at any time during the term of the arrangement either as collateral or as consideration for the particular security does not exceed 110% of the fair market value at that time of the particular security; and (b) that was neither intended, nor made as a part of a series of securities lending arrangements, loans or other transactions that was intended, to be in effect for more than 270 days. Interest coupon stripping arrangement — conditions (21) Subsection (22) applies at any time in respect of a taxpayer if (a) the taxpayer pays or credits a particular amount at that time as, on account or in lieu of payment of, or in satisfaction of, interest to a person or partnership (in this subsection and subsection (22) referred to as the “interest coupon holder”) in respect of a debt or other obligation, other than a specified publicly offered debt obligation, owed to another person or partnership (in this subsection and subsection (22) referred to as the “non-arm’s length creditor”) that is (i) a non-resident person with whom the taxpayer is not dealing at arm’s length, or (ii) a partnership other than a Canadian partnership; and (b) the tax that would be payable under this Part in respect of the particular amount, if the particular amount were paid or credited to the non-arm’s length creditor rather than the interest coupon holder, is greater than the tax payable under this Part (determined without reference to subsection (22)) in respect of the particular amount. Interest coupon stripping arrangement — application (22) If this subsection applies at any time in respect of a taxpayer, then for the purpose of paragraph (1)(b), the taxpayer is deemed, at that time, to pay interest to the non-arm’s length creditor, the amount of which is determined by the formula A × (B − C) ÷ B where A is the particular amount referred to in paragraph (21)(a); B is the rate of tax that would be imposed under this Part in respect of the particular amount if the particular amount were paid by the taxpayer to the non-arm’s length creditor rather than the interest coupon holder at that time; and C is the rate of tax imposed under this Part in respect of the particular amount paid or credited to the interest coupon holder at that time. Definition of specified publicly offered debt obligation (23) For the purposes of subsection (21), specified publicly offered debt obligation means a debt or other obligation that meets the following conditions: (a) it was issued by the taxpayer as part of an offering that is lawfully distributed to the public in accordance with a prospectus, registration statement or similar document filed with and, where required by law, accepted for filing by a public authority; and (b) it can reasonably be considered that none of the main purposes of a transaction or event, or series of transactions or events, as a part of which the taxpayer pays or credits an amount as, on account or in lieu of payment of, or in satisfaction of, interest to a person or partnership in respect of the debt or other obligation is to avoid or reduce tax that would otherwise be payable under this Part by a non-resident person or partnership to whom the debt or other obligation is owed. [NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 212; 1994, c. 7, Sch. II, s. 174, Sch. VI, s. 10, Sch. VIII, s. 123, c. 21, ss. 97, 137; 1995, c. 21, ss. 64, 73; 1996, c. 21, s. 55; 1997, c. 25, s. 63; 1998, c. 19, ss. 62, 216; 1999, c. 22, s. 75; 2000, c. 12, s. 142; 2001, c. 17, ss. 173, 226; 2007, c. 35, ss. 59, 121; 2009, c. 2, s. 73; 2010, c. 25, s. 64; 2012, c. 31, s. 48; 2013, c. 34, ss. 157, 347; 2014, c. 20, ss. 26, 366(E), c. 39, s. 64; 2016, c. 12, s. 57; 2017, c. 33, s. 74 2021, c. 23, s. 52 2022, c. 19, s. 53 2023, c. 26, s. 62 2026, c. 3, s. 87