(a) A non-interest bearing loan made by a corporation resident in Canada to a wholly-owned non-resident subsidiary remains outstanding for more than one year and does not qualify for the controlled foreign affiliate exception in subsection 17(8). Would s. 247(2) apply?
b) What if the loan is outstanding for less than a year but would have qualified for the s. 17(8) exception if it had been outstanding for more than a year?
(a) CRA indicated that the fact that s. 17(1) could apply to the amount of interest does not preclude the potential application of s. 247(2). Thus, even if s. 17(1) would result in a 1% inclusion in income, the total income inclusion would be 3% if that were the arm’s length rate.
(b) CRA indicated that notwithstanding that s. 247(7) would not apply (because s. 17 would not potentially apply), because this particular loan is the type of loan contemplated by s. 17(8) (and s. 247(7)), s. 247(2) would not be applicable.