Canco makes a loan to a partnership that is wholly-owned by an indirect U.S. parent of Canco (the general partner) and another non-resident partner within the group and whose business it is to make loans to group entities. That loan was subsequently repaid. In the course of a general discussion, CRA stated:
Subsection 227(6.1) … provides for repayment of Part XIII tax paid on a loan deemed to be a dividend by virtue of paragraph 214(3)(a) if the borrower, in whose name the tax was paid, repays the loan after December 21, 1992 and the repayment was not made as part of a series of loans or other transactions and repayments. The repayment is limited to the lesser of the Part XIII tax initially paid on the portion of the loan repaid, or the Part XIII tax that would be payable if, at the time of repayment, a dividend within the meaning of paragraph 212(2)(a), equal in amount to the repayment, were paid to the borrower. To obtain the repayment, it must be requested within two years of the end of the calendar year in which the amount was paid.