Income Tax Regulations — 5905
te was received by such other foreign affiliate immediately before any such dividend that it would have paid, that may reasonably be considered to relate to (b) the amount that would be the net surplus of the particular affiliate in respect of the corporation at that time assuming that (i) each other foreign affiliate of the corporation in which the particular affiliate had an equity percentage had immediately before that time paid a dividend equal to its net surplus in respect of the corporation immediately before the dividend was paid, and (ii) any dividend referred to in subparagraph (i) that would be received by another foreign affiliate was received by such other foreign affiliate immediately before any such dividend that it would have paid. (11) For the purposes of subsection (10), (a) if a particular foreign affiliate of a corporation has an equity percentage in another foreign affiliate of the corporation that has an equity percentage in the particular affiliate, the amount that would be the net surplus of, or the amount that would be a dividend received by, the particular affiliate is to be determined in a manner that is (i) reasonable in the circumstances, and (ii) consistent with the results that would be obtained if a series of actual dividends had been paid and received by the foreign affiliates of the corporation that are relevant to the determination; (b) if any foreign affiliate of a corporation resident in Canada has issued shares of more than one class of its capital stock, the amount that would be paid as a dividend on the shares of any class is the portion of its net surplus that, in the circumstances, it might reasonably be expected to have paid on all the shares of that class; and (c) if the particular affiliate’s net surplus as determined for the purposes of subsection (10) would, in the absence of this paragraph, be nil the particular affiliate’s net surplus for the purposes of that subsection is deemed to be the greater of (i) the amount of the particular affiliate’s retained earnings, if any, determined at the end of its last taxation year ending before the time referred to in that subsection under accounting principles that are relevant to the particular affiliate for that year, and (ii) the amount determined by the formula A × B where A is the amount of the particular affiliate’s total assets determined at the end of that year under accounting principles that are relevant to the particular affiliate for that year, and B is 25%. (12) [Repealed, 2013, c. 34, s. 84] (13) For the purposes of the definition surplus entitlement percentage in subsection 95(1) of the Act and of this Part, the surplus entitlement percentage at any time of a corporation resident in Canada in respect of a particular foreign affiliate of the corporation is, (a) the percentage that is the corporation’s equity percentage in the particular affiliate at that time if (i) the particular affiliate and each corporation that is relevant to the determination of the corporation’s equity percentage in the particular affiliate have, at that time, only one class of issued shares, and (ii) no foreign affiliate (referred to in this subparagraph as the “upper-tier affiliate”) of the corporation that is relevant to the determination of the corporation’s equity percentage in the particular affiliate has, at that time, an equity percentage in a foreign affiliate (including, for greater certainty, the particular affiliate) of the corporation that has an equity percentage in the upper-tier affiliate; and (b) in any other case, the proportion of 100 that (i) the aggregate of all amounts, each of which is the surplus entitlement at that time of a share owned by the corporation of the capital stock of a foreign affiliate of the corporation in respect of the particular foreign affiliate of the corporation is of (ii) the amount determined under paragraph (10)(b) to be the net surplus of the particular affiliate in respect of the corporation at that time.