I-3 - Taxation Act

Section 175.2.11 Disposition versions

2006-03-01

175.2.11. For the purposes of subparagraph d of the second paragraph of section 175.2.9, a reasonable amount on account of notional interest for a calculation period in respect of a branch advance is the amount that would be payable on account of interest for the period by a notional borrower, having regard to the duration of the advance, the currency in which repayment is required and all other terms, as determined with reference to paragraph c, of the advance, if

(a)  the borrower were a person that carried on the bank’s Canadian banking business, that dealt at arm’s length with the bank and that had the same credit-worthiness and borrowing capacity as the bank;

(b)  the advance were a loan by the bank to the borrower; and

(c)  any of the terms of the advance, excluding the rate of interest, but including the structure of the interest calculation, such as whether the rate is fixed or floating and the choice of any reference rate referred to, that are not terms that would be made between the bank as lender and the borrower, having regard to all the circumstances, including the nature of the Canadian banking business, the use of the advanced funds in the business and normal risk management practices for banks, were instead terms that would be agreed to by the bank and the borrower.

2004, c. 8, s. 32.