The Foreign Affiliate Rules

Format: Print Book
Product ID: 10096997-0001
This book describes the Canadian income tax rules applicable when a Canadian resident has a direct or indirect interest in shares of a non-resident corporation that is a foreign affiliate.

One guiding principle in structuring this book has been to focus on transactions and events as much as possible, since these are what practitioners face. For each type of transaction or event, the book brings together all the relevant FAPI and FA rules. The descriptions of rules specific to particular entities are generally relegated to separate chapters: Partnerships, Fiscally Transparent Foreign Affiliates, Financial Businesses, Institutions and Subsidiaries, Individuals, and Australian Trusts.

This 33-chapters book is based on the provisions of the Act and Regulations in force on April 1, 2020, and it briefly describes the amendments to the foreign affiliate dumping rules announced in the February 2019 federal budget and contained in draft legislation released on July 30, 2019. The rules that applied in prior years are not described, except occasionally.

The FAPI and foreign affiliate regimes are regarded by many tax practitioners as the most complex in the Income Tax Act and Regulations. While many articles have been written on aspects of the regimes, only a few books have been published that provide a thorough description of the rules.

The foundation for the discussion of specific transactions and events is laid by first describing the FAPI regime and then the FA regime (by the FA regime, we mean primarily the rules relating to the payment of dividends by foreign affiliates of resident corporations). Another guiding principle has been to describe the more specialized rules separately. For example, certain rules applicable only with respect to financial businesses and financial institutions are described in a separate chapter.

Numerous provisions have been added to the Act and Regulations since 2001 to address problems or to enable certain rules to apply with respect to structures that include partnerships. Those provisions have increased considerably the complexity of the FAPI and FA regimes. The application of the regimes to a structure that includes one or more partnerships is the topic of the longest chapter in the book (nicknamed the “monster chapter” when we were writing it), its length reflecting the fact that the rules for partnerships cut across the entire spectrum of the FAPI and FA rules.

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More Information
Contributors Bill Holmes , Ian Gamble
Product Type Publications
Format Print Book
Subject Area Non-Residents
Bill                          Holmes
Bill Holmes

Bill Holmes practiced as a solicitor with Thorsteinssons, retiring from the partnership in 2007 but continuing to serve clients for a few years after that. He had a wide-ranging practice, but also specialized in the FAPI and foreign affiliate rules, executive compensation, and life insurance companies and products. From 1991 to 1995, he worked in the Tax Legislation Division of the federal Department of Finance. From 2005 to 2007, Bill was Chair of the National Tax Section of the Canadian Bar Association and Co-Chair of the Joint Committee on Taxation.

Ian Gamble
Ian Gamble

Ian Gamble is tax counsel and a partner with Thorsteinssons LLP. He has over 30 years of corporate, business, and international tax experience, and represents a wide range of public and private clients in the mining, telecommunications, real estate, marine, forestry, and oil & gas sectors. Ian has been recognized as a leading tax lawyer by several publications, including Guide to the World’s Leading Tax Advisers, Lexpert Guide to the Leading US/Canada Cross-Border Corporate Lawyers in Canada, and Chambers’ Global Guide to the World’s Best Lawyers.