Income Tax Act — I-3.3 260
vidend, (a) the corporation is deemed to have paid the amount as a taxable dividend, where the corporation is not a registered securities dealer; and (b) the corporation is deemed to have paid 1/3 of the amount as a taxable dividend, where the corporation is a registered securities dealer. Non-resident withholding tax (8) For the purpose of Part XIII, any amount paid or credited under a securities lending arrangement or a specified securities lending arrangement by or on behalf of the borrower to the lender (a) as an SLA compensation payment in respect of a security that is not a qualified trust unit is, subject to paragraph (c), deemed (i) to the extent of the amount of the interest paid in respect of the security, to be a payment made by the borrower to the lender of interest, and (ii) to the extent of the amount of the dividend paid in respect of the security, to be a payment made by the borrower, as a corporation, to the lender of a dividend payable on the security; (b) as an SLA compensation payment in respect of a security that is a qualified trust unit, is deemed, to the extent of the amount of the underlying payment to which the SLA compensation payment relates, to be an amount paid by the trust and having the same character and composition as the underlying payment; (c) as an SLA compensation payment is deemed to be a payment of interest made by the borrower to the lender, if (i) the security that is transferred or lent to the borrower under the arrangement is a share of a class of the capital stock of a non-resident corporation, (ii) the borrower and the lender are not dealing at arm’s length, and (iii) the arrangement is not a fully collateralized arrangement; and (d) as, on account of, in lieu of payment of or in satisfaction of, a fee for the use of the security is deemed to be a payment of interest made by the borrower to the lender. Deemed fee for borrowed security (8.1) For the purpose of paragraph (8)(d), if under a securities lending arrangement or a specified securities lending arrangement the borrower has at any time provided the lender with money, either as collateral or consideration for the security, and the borrower does not, under the arrangement, pay or credit a reasonable amount to the lender as, on account of, in lieu of payment of or in satisfaction of, a fee for the use of the security, the borrower is deemed to have, at the time that an identical or substantially identical security is or can reasonably be expected to be transferred or returned to the lender, paid to the lender under the arrangement an amount as a fee for the use of the security equal to the amount, if any, by which (a) the interest on the money computed at the prescribed rates in effect during the term of the arrangement exceeds (b) the amount, if any, by which any amount that the lender pays or credits to the borrower under the arrangement exceeds the amount of the money. Effect for tax treaties — interest (8.2) In applying subparagraph (8)(a)(i), if a securities lending arrangement or specified securities lending arrangement is a fully collateralized arrangement, any SLA compensation payment deemed to be a payment made by the borrower to the lender of interest is deemed for the purposes of any tax treaty to be payable on the security. Effect for tax treaties — dividend (8.3) In applying subparagraph (8)(a)(ii), if the security is a share of a class of the capital stock of a corporation resident in Canada (in this subsection referred to as the “Canadian share”), for the purposes of determining the rate of tax that Canada may impose on a dividend because of the dividend article of a tax treaty, (a) any SLA compensation payment deemed to be a payment made by the borrower to the lender of a dividend is deemed to be paid by the issuer of the Canadian share and not by the borrower; (b) the lender is deemed to be the beneficial owner of the Canadian share; and (c) the shares of the capital stock of the issuer owned by the lender are d