I-3 - Taxation Act

Section 580.2 Disposition versions

2021-06-02

580.2. For the purposes of this chapter and Chapter IV, the rules set out in section 580.3 apply at a particular time in respect of a particular foreign affiliate of a taxpayer resident in Canada if

(a)  an amount would be included under section 580 in computing the taxpayer’s income, in respect of a share of the particular foreign affiliate or another foreign affiliate of the taxpayer that has an equity percentage in the particular foreign affiliate, for the taxation year of the particular foreign affiliate (determined without reference to section 580.3) that includes the particular time (in this section and section 580.1 referred to as the “ordinary taxation year” of the particular foreign affiliate), if the ordinary taxation year of the particular foreign affiliate had ended at the particular time;

(b)  immediately after the particular time, there is

i.  an acquisition of control of the taxpayer, or

ii.  a triggering event that can reasonably be considered to result in a change in the aggregate participating percentage of the taxpayer in respect of the particular foreign affiliate for the ordinary taxation year of the particular foreign affiliate;

(c)  where subparagraph i of subparagraph b applies, the condition of paragraph c of subsection 1.1 of section 91 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) is met in respect of the particular foreign affiliate; and

(d)  where subparagraph ii of subparagraph b applies, none of the following is the case:

i.  the change in the aggregate participating percentage referred to in subparagraph ii of subparagraph b is a decrease and is equal to the total of all amounts each of which is the increase—that can reasonably be considered to result from the triggering event—in the aggregate participating percentage of another taxpayer, in respect of the particular foreign affiliate for the ordinary taxation year of the particular foreign affiliate, if the other taxpayer

(1)  is a person resident in Canada, other than a person that is—or a trust, any of the beneficiaries under which is—exempt from tax under this Part, and

(2)  is a person related to the taxpayer at the particular time, if the triggering event results from a winding-up of the taxpayer referred to in section 556, or immediately after the particular time, in any other case,

ii.  the triggering event is on an amalgamation within the meaning of subsection 1 of section 544,

iii.  the triggering event is an excluded acquisition or disposition, in respect of the ordinary taxation year of the particular foreign affiliate, and

iv.  if one or more triggering events—all of which are described in subparagraph ii of subparagraph b and in respect of which none of the conditions of subparagraphs i to iii are met—occur in the ordinary taxation year of the particular foreign affiliate, the percentage determined by the following formula is not greater than 5%:

A – B.

In the formula in subparagraph iv of subparagraph d of the first paragraph,

(a)  A 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 ii of subparagraph b of the first paragraph (other than a triggering event that meets the conditions of subparagraph i or ii of subparagraph d of the first paragraph)—in the aggregate participating percentage of the taxpayer in respect of the particular foreign affiliate for the ordinary taxation year of the particular foreign affiliate; and

(b)  B 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 ii of subparagraph b of the first paragraph (other than a triggering event that meets the conditions of subparagraph i or ii of subparagraph d of the first paragraph)—in the aggregate participating percentage of the taxpayer in respect of the particular foreign affiliate for the ordinary taxation year of the particular foreign affiliate.

2021, c. 14, s. 47.