17 May 2022 IFA Roundtable Q. 4, 2022-0931121C6 - PLOI Administrative Policies

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Announcement of new administrative policies relating to PLOI election and late-filed penalties.

Position: New administrative policies adopted by the CRA.

Reasons: See below.

2022 International Fiscal Association Conference

CRA Roundtable

Question 4 – PLOI Late-Filed Penalties and Administrative Relief

Where subsection 15(2) or the foreign affiliate dumping rules under section 212.3 would otherwise apply to an amount owing to a corporation resident in Canada (“CRIC”) or certain partnerships, subsections 15(2.11) and 212.3(11) allow for a pertinent loan or indebtedness (“PLOI”) election to be filed in respect of that amount. Where there is more than one amount owing between the two parties, the CRA has indicated in technical interpretation 2014-0534541I7 that a separate PLOI election is required for each amount owing, notwithstanding that a taxpayer may prepare and file a single written communication containing each such PLOI election. At the May 26, 2016 IFA CRA Roundtable, the CRA stated (2016-0642031C6) that, based on the language of subsections 15(2.13) and 212.3(13), the late-filing penalty calculations must be applied separately for each amount that is elected to be a PLOI. However, the CRA also stated that it was exploring whether an administrative position could be taken to aggregate certain amounts for purposes of the PLOI election late-filing penalty calculation.

Could you please provide an update on the status of this review?

CRA Response

On March 25, 2022, the CRA published revised taxpayer instructions for filing a PLOI election at: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-payments/understanding-interest.html#lns (the “PLOI election webpage”). These revised instructions continue to require the election to be made by submitting a letter to the taxpayer’s tax centre of record. However, the information that is required to be included in the election has been changed. This additional information will allow the CRA to more readily confirm that the income inclusion deemed under section 17.1 is computed correctly.

In addition to the revised information requirements, the PLOI election webpage describes a new administrative policy adopted by the CRA in respect of PLOI elections filed on or after April 11, 2022. According to this administrative policy, only one PLOI election is required to be filed in respect of separate amounts owing to a CRIC by a non-resident person, provided that each such amount is governed by the same agreement. For example, a revolving loan will require one single election notwithstanding that there have been or will be multiple amounts borrowed and repaid under that same agreement. The policy would also be applicable in a situation involving intercompany trade receivables, such as the one described at the 2016 IFA conference, provided that each amount is subject to the terms and conditions of the same agreement.

For full details regarding the revised information requirements and new administrative policy, please refer to the PLOI election webpage.

Relief for late-filing penalties applicable to previously filed elections

For taxpayers who have filed a PLOI election before April 11, 2022 and been assessed late filing penalties in respect of loans or indebtedness to which the new administrative policy described above would otherwise have applied, had the election been filed on or after March 25, 2022, the CRA will offer relief in certain circumstances upon request. Please refer to the PLOI election webpage for further information.

Grace Tu
2022-093112
May 17, 2022

Prepared in collaboration with:

International and Large Business Directorate
Compliance Programs Branch