Income Tax Act — I-3.3 95
ncome, as the case may be, for the taxation year, and (V) the election is filed on or before the filing-due date of the taxpayer for its taxation year in which the taxation year ends, and (F) the following rules apply for the purposes of applying subsection 12.7(3) and the related provisions of section 18.4 in respect of a payment of which the foreign affiliate, or a partnership of which the foreign affiliate is a member, is a recipient: (I) the definitions in subsection 18.4(1) apply for the purposes of this clause, (II) subsection 12.7(3) is deemed not to apply in respect of the payment if 1 the foreign affiliate’s income or loss derived from the payment is included under subparagraph (a)(ii) in computing the foreign affiliate’s income or loss from an active business for a taxation year, or 2 in the case of a payment that subsection 18.4(9) deems to be made to the foreign affiliate or the partnership by a particular entity in respect of a notional interest expense on a particular debt, any income or loss that were derived by the foreign affiliate from the payment would, based on the relevant assumptions in respect of the payment, be included under subparagraph (a)(ii) in computing the foreign affiliate’s income or loss from an active business for a taxation year, (III) for the purposes of sub-subclause (II)2, the relevant assumptions in respect of the payment are 1 the payment is an amount of interest paid by the particular entity to the foreign affiliate or the partnership, as the case may be, under a legal obligation to pay interest on the particular debt in the taxation year of the foreign affiliate or the partnership in which an amount in respect of the payment would, in the absence of subclause (II), be included under subsection 12.7(3) in the income of the foreign affiliate or partnership, and 2 any amount that is deductible, in respect of the notional interest expense, is an amount deductible in respect of an expenditure for which the payment was made, and (IV) the definition Canadian ordinary income in subsection 18.4(1) is to be read as if 1 its subparagraph (a)(ii) read as follows: “(ii) the amount is described in paragraph (b) or (c) of the description of A in the definition foreign accrual property income in subsection 95(1), or”, and 2 the description of D in its paragraph (b) read as follows: “D is the total of all amounts, each of which is an amount, in respect of the payment, that is included in the description of H in the definition foreign accrual property income in subsection 95(1) in computing the foreign accrual property income of a member of the partnership for a taxation year; or”; (f.12) a foreign affiliate of a taxpayer shall determine each of the following amounts using its calculating currency for a taxation year: (i) subject to paragraph (f.13), each capital gain, capital loss, taxable capital gain and allowable capital loss (other than a gain or loss in respect of a debt referred to in subparagraph (i)(i) or (ii)) of the foreign affiliate for the taxation year from the disposition, at any time, of a property that, at that time, was an excluded property of the foreign affiliate, (ii) its income or loss for the taxation year from each active business carried on by it in the taxation year in a country, and (iii) its income or loss that is included in computing its income or loss from an active business for the taxation year because of paragraph (a); (f.13) where the calculating currency of a foreign affiliate of a taxpayer is a currency other than Canadian currency, the foreign affiliate shall determine the amount included in computing its foreign accrual property income, in respect of the taxpayer for a taxation year of the foreign affiliate, attributable to its capital gain or taxable capital gain, from the disposition of an excluded property in the taxation year, in Canadian currency by converting the amount of the capital gain, or taxable capital gain, otherwise determined under subparagraph (f.