Income Tax Act ( R.S.C. , 1985, c. 1 (5th Supp.))

A — B where is the total of all amounts each of which is the decrease — which can reasonably be considered to result from a triggering event described in subparagraph (b)(ii) (other than a triggering event that satisfies the conditions in subparagraph (i) or (ii)) — in the aggregate participating percentage of the taxpayer in respect of the particular affiliate for the ordinary taxation year of the particular affiliate, and is the total of all amounts each of which is the increase — which can reasonably be considered to result from a triggering event described in subparagraph (b)(ii) (other than a triggering event that satisfies the conditions in subparagraph (i) or (ii)) — in the aggregate participating percentage of the taxpayer in respect of the particular affiliate for the ordinary taxation year of the particular affiliate.

• (a) in respect of the particular taxpayer and each connected person, or connected partnership, in respect of the particular taxpayer, the affiliate’s taxation year that would, in the absence of this subsection, have included the particular time is deemed to have ended at the time (referred to in this section as the “stub-period end time”) that is immediately before the particular time;
• (b) if the affiliate is, immediately after the particular time, a foreign affiliate of the particular taxpayer or a connected person, or connected partnership, in respect of the particular taxpayer, the affiliate’s next taxation year after the stub-period end time is deemed, in respect of the particular taxpayer or the connected person or connected partnership, as the case may be, to begin immediately after the particular time; and
• (c) in determining the foreign accrual property income of the affiliate for the taxation year referred to in paragraph (a) in respect of the particular taxpayer or a connected person or connected partnership, in respect of the particular taxpayer, all transactions or events that occur at the particular time are deemed to occur at the stub-period end time.

• (a) does not deal at arm’s length with the particular taxpayer; or
• (b) deals at arm’s length with the particular taxpayer, if
  • (i) the foreign affiliate is a foreign affiliate of the person at the particular time, and
  • (ii) the aggregate participating percentage of the person in respect of the foreign affiliate for the affiliate’s ordinary taxation year may reasonably be considered to have increased as a result of the triggering event that gave rise to the application of subsection (1.2). ( personne rattachée )

  , in respect of a particular taxpayer, means a partnership if, at or immediately after the particular time at which subsection (1.2) applies in respect of a foreign affiliate of the particular taxpayer,

  • (a) the particular taxpayer or a connected person in respect of the particular taxpayer is, directly or indirectly through one or more partnerships, a member of the partnership; or
  • (b) if paragraph (a) does not apply,
    • (i) the foreign affiliate is a foreign affiliate of the partnership at the particular time, and
    • (ii) the aggregate participating percentage of the partnership in respect of the foreign affiliate for the affiliate’s ordinary taxation year may reasonably be considered to have increased as a result of the triggering event that gave rise to the application of subsection (1.2). ( société de personnes rattachée )

    , in respect of a taxation year of a foreign affiliate of a taxpayer, means an acquisition or disposition of an equity interest in a corporation, partnership or trust that can reasonably be considered to result in a change in the aggregate participating percentage of the taxpayer in respect of the affiliate for the taxation year of the affiliate, if

    • (a) the change is less than 1%; and
    • (b) it cannot reasonably be considered that one of the main reasons the acquisition or disposition occurs as a separate acquisition or disposition from one or more other acquisitions or dispositions is to avoid the application of subsection (1.2). ( acquisition ou disposition exclue )
    • (a) an acquisition or disposition of an equity interest in a corporation, partnership or trust;
    • (b) a change in the terms or conditions of a share of the capital stock of a corporation or the rights as a member of a partnership or as a beneficiary under a trust; and
    • (c) a disposition or change of a right referred to in paragraph 95(6)(a). ( événement déclencheur )
    • (a) the conditions in paragraph (1.1)(a) are met in respect of the particular affiliate at the particular time;
    • (b) immediately after the particular time there is a disposition of shares of the capital stock of the particular affiliate or another foreign affiliate of the taxpayer that had an (as defined in subsection 95(4)) in the particular affiliate by
      • (i) the taxpayer, or
      • (ii) a controlled foreign affiliate of the taxpayer; and
      • (i) the corporation is resident in Canada,
      • (ii) the corporation does not deal at arm’s length with the taxpayer, and
      • (iii) the particular affiliate is a foreign affiliate of the corporation, or of a partnership of which the corporation is, directly or indirectly through one or more partnerships, a member.
      • (a) the product obtained when
        • (i) the portion of the foreign accrual tax applicable to the income amount that was not deductible under this subsection in any previous year

        is multiplied by

        • (ii) the taxpayer’s relevant tax factor for the year, and
        • (a) a specified owner in respect of the taxpayer is considered,
          • (i) under the income tax laws (referred to in subsections (4.5) and (4.6) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of a particular corporation — that is, at any time in the affiliate year, a pertinent person or partnership in respect of the particular affiliate — is subject to income taxation, to own less than all of the shares of the capital stock of the particular corporation that are considered to be owned by the specified owner for the purposes of this Act, or
          • (ii) under the income tax laws (referred to in subsections (4.5) and (4.6) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of a particular partnership — that is, at any time in the affiliate year, a pertinent person or partnership in respect of the particular affiliate — is subject to income taxation, to have a lesser direct or indirect share of the income of the particular partnership than the specified owner is considered to have for the purposes of this Act; or
          • (a) a partnership of which the taxpayer is a member;
          • (b) a foreign affiliate of the taxpayer;
          • (c) a partnership a member of which is a foreign affiliate of the taxpayer; or
          • (d) a person or partnership referred to in any of subparagraphs (4.4)(a)(i) to (iii).
          • (a) another foreign affiliate of the taxpayer
            • (i) in which the particular affiliate has an equity percentage, or
            • (ii) that has an equity percentage in the particular affiliate;
            • (a) if the funding affiliate is, or the funding partnership has a member that is, a foreign affiliate of the related person, the following persons and partnerships are deemed, at all times during which the foreign accrual property income is earned by the particular affiliate, to be specified owners in respect of the taxpayer:
              • (i) the related person,
              • (ii) each foreign affiliate of the related person, and
              • (iii) each partnership a member of which is a person referred to in subparagraph (i) or (ii); and
              • (i) the funding affiliate or the funding partnership,
              • (ii) a non-resident corporation
                • (A) in which the funding affiliate has an equity percentage, or
                • (B) that has an equity percentage in the funding affiliate, and
                • (a) a difference between the relevant foreign tax law and this Act in the manner of
                  • (i) computing the income of the partnership, or
                  • (ii) allocating the income of the partnership because of the admission to, or withdrawal from, the partnership of any of its members;
                  • (a) the amount by which that portion of the dividend exceeds the amount, if any, deductible in respect thereof under paragraph 113(1)(b), and
                  • (b) the amount, if any, by which
                    • (i) the total of all amounts required by paragraph 92(1)(a) to be added in computing the adjusted cost base to the taxpayer of the share before the dividend was so received by the taxpayer
                    • (ii) the total of all amounts required by paragraph 92(1)(b) to be deducted in computing the adjusted cost base to the taxpayer of the share before the dividend was so received by the taxpayer.
                    • (a) that portion of any amount required by subsection 92(1) to be added to the adjusted cost base to the partnership of the share of the capital stock of the foreign affiliate equal to the amount included in the income of the member because of subsection 96(1) in respect of the amount that was included in the income of the partnership because of subsection (1) or (3) in respect of the foreign affiliate and added to that adjusted cost base, and
                    • (b) that portion of any amount required by subsection 92(1) to be deducted from the adjusted cost base to the partnership of the share of the capital stock of the foreign affiliate equal to the amount by which the income of the member from the partnership under subsection 96(1) was reduced because of the amount deducted in computing the income of the partnership under subsection (2), (4) or (5) and deducted from that adjusted cost base

                    is deemed to be an amount required by subsection 92(1) to be added or deducted, as the case may be, in computing the adjusted cost base to the taxpayer of the share.

                    • [NOTE: Application provisions are not included in the consolidated text
                    • see relevant amending Acts and regulations.]
                    • R.S., 1985, c. 1 (5th Supp.), s. 91
                    • 1994, c. 7, Sch. II, s. 68
                    • 2001, c. 17, s. 68
                    • 2007, c. 35, s. 24
                    • 2009, c. 2, s. 23
                    • 2013, c. 34, s. 226
                    • 2017, c. 33, s. 28
                    • 2024, c. 15, s. 21