Subsection 91(1) - Amounts to be included in respect of share of foreign affiliate
Cases
Canada v. Loblaw Financial Holdings Inc., 2021 SCC 51
After providing an overview of the FAPI system, Côté J stated (at para. 56):
... I conclude that the specific provisions relating to FAPI were...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Business | “business conducted,” as contrasted to “business,” did not include the raising of capital | 229 |
| Tax Topics - General Concepts - Foreign Law | meaning of banking business under Barbados law was not persuasive | 234 |
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Investment Business - Paragraph (a) | bank business was conducted with arm's length persons notwithstanding that capital raised from shareholder | 579 |
| Tax Topics - Statutory Interpretation - Certainty | full effect should be given to Parliament’s precise and unequivocal words to produce certainty | 88 |
| Tax Topics - Statutory Interpretation - Speaking in vain | Parliament does not speak in vain | 72 |
| Tax Topics - Statutory Interpretation - Expressio Unius est Exclusio Alterius | specific addition of a competition requirement in another provision implied that there was no such requirement here | 152 |
Administrative Policy
15 December 2004 External T.I. 2004-0081411E5 F - Société étrangère
CRA provided a general overview of the FAPI rules respecting a resident individual owning 60% of the shares of a foreign corporation earning all...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(4) - Paragraph 128.1(4)(b) | deemed disposition on emigration of individual’s shares of CFA | 108 |
13 December 1994 Internal T.I. 9430770 - FOREIGN AFFILIATE - TAXATION YEAR
Where a corporation resident in Canada with a June 30 taxation year end owns a Singapore subsidiary that maintains a September 30 year end for...
Articles
Ilia Korkh, Eivan Sulaiman, "Outbound Partnerships: FAPI in Unexpected Places", Canadian Tax Highlights, Vol. 27, No. 12, December 2019, p. 10
Interposition of a partnership between a small stakeholder and a non-resident corp may generate FAPI (p. 10)
FAPI of a non-resident corporation...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(a) - Subparagraph 95(2)(a)(ii) - Clause 95(2)(a)(ii)(B) | 155 |
Jonah Bidner, "An Individual's Direct Ownership of a CFA", Canadian Tax Focus, Vol. 6, No. 4, November 2016, p. 12
77% effective tax rate on property income subject to US tax (pp. 12-13)
Suppose that Forco, a foreign corporation (characterized as such on the...
Kevin Duxbury, "Canadian-Owned US LLCs More Costly After the Fifth Protocol", Tax for the Owner-Manager, Vol. 9, No. 4, October 2009, p. 8.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Treaties - Income Tax Conventions - Article 4 | 0 |
Pierre Bourgeois, "Canadian Taxation of Offshore Income: A Primer", 1999 Conference Report, c. 2.
Subsection 91(1.1)
Articles
Joint Committee, "Technical Amendments Package of September 16, 2016", Submission letter of 15 November 2016
Otherwise de minimis changes effectively are linked to another change not part of the series
The de minimis exception in s. 91(1.1)(b) does not...
Angelo Nikolakakis, "Guess Who's Back? The Revised Stub Period Rule for FAPI", International Tax, CCH Wolters Kluwer, No. 90, October 2016, p. 8
General potential triggering of stub year for controlled foreign affiliate (CFA) if disposition triggering change to surplus entitlement...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 91 - Subsection 91(1.2) | 147 | |
| Tax Topics - Income Tax Act - Section 91 - Subsection 91(1.4) | 184 | |
| Tax Topics - Income Tax Act - Section 91 - Subsection 91(1.5) | 160 |
Melanie Huynh, Paul Barnicke, "September 2016 FA Proposals", Canadian Tax Highlights, Vol. 24, No. 10, October 2016, p. 8
Thrust of new stub-period accrual rules if s. 91(1.1) exceptions do not apply (p. 8)
If the exceptions do not apply, the CFA has a deemed stub...
Nathan Boidman, "Canada Augments International Tax Rules", Tax Management International Journal, Vo. 43, No. 12, December 12, 2014, p. 759.
Previously no pick-up of FAPI if not a CFA at year end (p. 762)
One surprise in Bill C-43 is that it does not contain a substantial amendment...
Subsection 91(1.2)
Articles
Monique Sami, "Further Refinements to Stub Period FAPI", International Tax (Wolters Kluwer CCH), October 2017, No. 96, p. 4
18 September 2017 proposals (“Current Proposals”) did not extend s. 91(1.2) to acquisition of shares of (existing) FA from NR (p. 9)
[N]o...
Paul Barnicke, Melanie Huynh, "Revised Stub-Period FAPI", Canadian Tax Highlights, Vol. 25, No. 10, October 2017, p. 3
Potential double-taxation of stub-period FAPI where an arm’s length individual or trust has a participating percentage (PP) increase (p. 4)
If...
Joint Committee, "Technical Amendments Package of September 16, 2016", Submission letter of 15 November 2016
Recognition should be based on PP rather than SEP changes
The triggering event for a stub period under s. 91(1.2) should be a change in the...
Angelo Nikolakakis, "Guess Who's Back? The Revised Stub Period Rule for FAPI", International Tax, CCH Wolters Kluwer, No. 90, October 2016, p. 8
Stub period for CFA applies re NAL Cdn corps (p. 10)
[T]his deemed [s. 91(1.2)] year end applies… also in respect of each corporation or...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 91 - Subsection 91(1.1) | 338 | |
| Tax Topics - Income Tax Act - Section 91 - Subsection 91(1.4) | 184 | |
| Tax Topics - Income Tax Act - Section 91 - Subsection 91(1.5) | 160 |
Paul L. Barnicke, Melanie Huynh, "Stub Period FAPI on Disposition", Canadian Tax Highlights, Vol. 21, No. 8, p. 6
Deemed year-end for CFA whose SEP increases? (p. 6)
The proposal's charging provision operates whenever – vis-à-vis a particular CFA – there...
Edward A. Heakes, "Another Wave of Foreign Affiliate Proposals", International Tax Planning, Volume XVIII, No. 4, 2013, p. 1275
Narrowness of connected definition (p. 1275)
[A]ssume that A is a non-resident that owns 100% of the shares of two first tier Canadian holding...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Taxable Canadian Property | 76 | |
| Tax Topics - Income Tax Act - Section 87 - Subsection 87(8.3) | 104 |
Subsection 91(1.4)
Articles
Joint Committee, "Technical Amendments Package of September 16, 2016", Submission letter of 15 November 2016
Excluded property test not appropriate
It would be preferable for the rules in ss. 91(1.4) and (1.5) to apply by default, with taxpayers being...
Angelo Nikolakakis, "Guess Who's Back? The Revised Stub Period Rule for FAPI", International Tax, CCH Wolters Kluwer, No. 90, October 2016, p. 8
Need not be two dispositions for s. 91(1.4) to apply, and excluded property condition may be meaningless (p. 11)
Subsection 91(1.4) is designed to...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 91 - Subsection 91(1.1) | 338 | |
| Tax Topics - Income Tax Act - Section 91 - Subsection 91(1.2) | 147 | |
| Tax Topics - Income Tax Act - Section 91 - Subsection 91(1.5) | 160 |
Subsection 91(1.5)
Articles
Joint Committee, "Technical Amendments Package of September 16, 2016", Submission letter of 15 November 2016
Exclusion of arm’s length purchase from NR inappropriate if carve-out rule unavailable
The unavailability of s. 91(1.5) (allowing a purchaser to...
Angelo Nikolakakis, "Guess Who's Back? The Revised Stub Period Rule for FAPI", International Tax, CCH Wolters Kluwer, No. 90, October 2016, p. 8
Potential relieving effect of s. 91(1.5) (p. 12)
Subsection 91(1.5) is designed to address the interaction of subsection 91(1.2) and the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 91 - Subsection 91(1.1) | 338 | |
| Tax Topics - Income Tax Act - Section 91 - Subsection 91(1.2) | 147 | |
| Tax Topics - Income Tax Act - Section 91 - Subsection 91(1.4) | 184 |
Subsection 91(4) - Amounts deductible in respect of foreign taxes
See Also
Burton v Commissioner of Taxation, [2019] FCAFC 141
The taxpayer was an Australian resident who was taxed at the 15% long-term U.S. capital gains rate on his gains on disposal of U.S. oil and gas...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Treaties - Income Tax Conventions - Article 24 | “income” was the full U.S. gain, but FTC to be calculated based on Australian (1/2 recognition) principles | 581 |
Administrative Policy
25 March 2004 Internal T.I. 2002-0134201I7 - Foreign accrual tax-timing of Deduction
Respecting the potential relevance of the phrase "or for any of the 5 immediately preceding years" in the preamble and "the portion of the foreign...
Articles
Marc André Gaudreau Duval, Michael N. Kandev, "Foreign Affiliate Issues in Troubled Times", International Tax (Wolters Kluwer CCH), No. 112, June 2020, p. 1
COVID-19 related deferral of foreign taxes may eliminate current FAT deduction (p. 5)
Assuming that an amount is not recognized as FAT until it is...
Tim Barrett, Kevin Duxbury, "Corporate Integration: Outbound Structuring in the United States After Tax Reform", 2018 Conference Report (Canadian Tax Foundation), 18:1-76
LLC-related FAT issues (pp. 18:24–25)
US tax paid by a Canadian member on an LLC’s income is not FAT for the purposes of subsection...
Paul Dhesi, Korinna Fehrmann, "Integration Across Borders", Canadian Tax Journal, (2015) 63:4, 1049-72
Inclusion of FAPI in aggregate investment income ("AII") (p.1052)
[F]API, as income earned from a share, should be included in a CCPC's AII in the...
Michael G. Bronstetter, Douglas R. Christie, "The Fickle Fingers of FAT: An Analysis of Foreign Accrual Tax", International Tax Planning, 2003 Canadian Tax Journal, No. 3, p. 1377.
Melanie Huynh, Eric Lockwood, "Foreign Accrual Property Income: A Practical Perspective", International Tax Planning, 2000 Canadian Tax Journal, Vol. 48, No. 3, p. 752.
Subsection 91(4.1) - Denial of foreign accrual tax
Articles
Ian Bradley, Ken J. Buttenham, "The New Foreign Tax Credit Generator Rules", International Tax Planning, Volume XVIII, No. 2, 2012, p. 1228, at 1231
The FAT [foreign accrual tax] or UFT [underlying foreign tax] denied under the FTCG [foreign tax credit generator] Rules is not limited to the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 91 - Subsection 91(4.7) | 232 |
Angelo Nikolakakis, "Foreign Tax Credit Generators - Revised Proposals, Continuing Concerns", CCH International Tax, Nos. 54-55, December, 2010, p. 19.
Subsection 91(4.4) - Series of transactions
Articles
Ian Bradley, Ken J. Buttenham, "The New Foreign Tax Credit Generator Rules", International Tax Planning, Volume XVIII, No. 2, 2012, p. 1228, at 1230
After describing the cross-chain funding rule in draft s. 91(4.1) and Reg. 5907(1.06), they provided this example:
For example, consider a...
Subsection 91(4.5) - Exception — hybrid entities
Articles
Philippe Montillaud, Grant J. Russell, "Foreign Accrual Tax and Flow-through Entities", International Tax Planning, Volume XVIII, No. 4, 2013, p. 1280
No relief where PPOP is the hybrid (p. 1281)
Subsection 91(4.5) does not provide relief, however, where the PPOP itself is the hybrid entity. For...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(e) | 359 | |
| Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(5) | 359 |
Ian Bradley, Ken J. Buttenham, "The New Foreign Tax Credit Generator Rules", International Tax Planning, Volume XVIII, No. 2, 2012, p. 1228, 1231-1232
Unlike the August 2010 Proposals, the exception for the hybrid entities in the current FTCG [foreign tax credit generator] Rules only applies to...
Paul L. Barnicke, Melanie Huynh, "Losing the FAT", Volume 21, Number 2, February 2013, 13 at 14
…FAT denial does not arise in situations where the specified owner does not own the same number of FA shares in the PPOP [pertinent person or...
Subsection 91(4.6)
Paragraph 91(4.6)(b)
Articles
Joint Committee, "Technical Amendments Package of September 16, 2016", Submission letter of 15 November 2016
Safe harbour does not extend to upper tier hybrid partnerships
Similarly to draft s. 91(4.5), the exceptions in ss. 91(4.6)(b) and 126(4.12)(b)...
Subsection 91(4.7) - Deemed ownership
Administrative Policy
26 April 2017 IFA Roundtable Q. 5, 2017-0691121C6 - Foreign tax credit Brazilian interest on equity
The test under s. 91(4.1) is deemed by s. 91(4.7) to be met if, under relevant foreign law, dividends on shares held by specified owner are...
Articles
Ian Bradley, Ken J. Buttenham, "The New Foreign Tax Credit Generator Rules", International Tax Planning, Volume XVIII, No. 2, 2012, p. 1228, at 1231
After referring to the expansion of the income test in s. 91(4.1)(a) by virtue of the deductible dividend test in s. 91(4.7), they stated:
… On...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 91 - Subsection 91(4.1) | 205 |
Paul L. Barnicke, Melanie Huynh, "Losing the FAT", Canadian Tax Highlights,Volume 21, Number 2, February 2013, 13 at 14.
Under some foreign tax laws, dividends or similar amounts in respect of an FA are either tax-deductible interest payments or other deductible...
Subsection 91(5) - Amounts deductible in respect of dividends received
Administrative Policy
18 July 2018 Internal T.I. 2018-0766441I7 - Article XXIX(5) and 91(5)
An individual who was a Canadian resident and a US citizen and who owned voting shares of an S Corporation paid US taxes on its income. During...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(28) | S Corp income included as FAPI by virtue of Treaty S Corp. agreement was a separate amount for s. 248(28) purposes from the subsequent dividending of that income | 335 |
| Tax Topics - Treaties - Income Tax Conventions - Article 29 | agreement with CASD terminated when S Corp. ceased to be fiscally transparent | 207 |
16 May 2018 IFA Roundtable Q. 3, 2018-0749171C6 - Interaction s.91(5) s.93.1(2)(d)(i)
Canco (and its Canadian sub) hold LP, which received a $3,000 dividend from a wholly-owned foreign affiliate (FA). Although the dividend came out...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 93.1 - Subsection 93.1(2) - Paragraph 93.1(2)(d) - Subparagraph 93.1(2)(d)(i) | s. 93.1(2)(d)(i) limit does not reflect acquisition-debt interest deduction of LP | 418 |
| Tax Topics - Income Tax Regulations - Regulation 5900 - Subsection 5900(3) | corporate-owned LP treated transparently to avoid a surplus anomaly re s. 91(5) dividend | 226 |
16 November 2015 Internal T.I. 2015-0598491I7 - 91(5) & FAPI included per “old” 94(1)(c)(i)(C)
A non-resident discretionary trust (“NRT”) owned all the shares of CFA. Amounts in respect of CFA’s foreign accrual property income had to...
27 June 2008 External T.I. 2007-0247551E5 - FAPI and Part XIII Tax
A partnership (FP) between two CFAs of Canco received dividends (the “Foreign Dividends”) from a non-resident subsidiary of FP (NRco) and...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 96 | DRUPA partnership | 38 |
| Tax Topics - Income Tax Regulations - Regulation 5900 - Subsection 5900(3) | partnership between 2 CFAs was a Cdn-resident person for s. 91(5) purposes | 68 |
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Property Income - A - Paragraph (b) | FA dividends received by NR partnership between 2 CFAs (FP) not excluded from FAPI, but deduction under s. 91(5)/ Reg. 5900(3) to FP | 298 |
| Tax Topics - Income Tax Act - Section 92 - Subsection 92(1) - Paragraph 92(1)(a) | double ACB recognition of FAPI at partnership level and at level of Canco shareholder of CFA partners | 230 |
Articles
Tim Barrett, Kevin Duxbury, "Corporate Integration: Outbound Structuring in the United States After Tax Reform", 2018 Conference Report (Canadian Tax Foundation), 18:1-76
Current s. 91(5) deduction for FAPI included in individual LLC member’s income as the dividend payment (p. 18:27)
When an LLC pays a dividend to...
Bradley, "Foreign Affiliates: A Technical Update", 1990 Conference Report, c. 43
Deficiencies in s. 91(5) (pp. 43:7-43:8):
- No recognition is provided for FAPI that was taxed in respect of a share while the share was owned by a...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 93 - Subsection 93(1) | 0 |
Paragraph 91(5)(b)
Administrative Policy
5 October 2001 External T.I. 2001-0093345 F - Déduction prévue à 91(5)
Parent transfers all of its shares of CFA1, which has earned FAPI, under s. 85.1(3) to newly-incorporated CFA2 in exchange for shares of CFA2....
4 September 1990 Ruling 59693 F - Amounts Deductible in Respect of Dividends Received
F, a controlled foreign affiliate of C, a taxable Canadian corporation, F earns foreign accrual property income ("FAPI") during its 1990 taxation...