At the November 30, 2016 CTF Annual Conference, CRA has changed its 2009 view, and now considered that where a foreign affiliate is a disregarded U.S. LLC with a single-member regarded U.S. corporation, its earnings should be computed under Canadian income tax law under Reg. 5907(1) – earnings - s. (a)(iii), rather than under the Code under s. (a)(i), effective for taxation years ending after August 19, 2011. Will CRA provide transitional relief? CRA responded:
[I]f a taxpayer uses the 2009 Position to calculate the earnings of a foreign affiliate that is a disregarded U.S. LLC for the LLC’s taxation years ended on or before November 29, 2016 (i.e. on or before the day the 2016 Position was announced), the CRA is prepared to accept that calculation, provided that the taxpayer and all taxpayers related to the taxpayer use the 2009 Position to calculate the earnings of all of their foreign affiliates that are disregarded U.S. LLCs for all taxation years of these LLCs that ended on or before November 29, 2016. …
T]he earnings of a disregarded U.S. LLC for any taxation year that ends after November 29, 2016, should be computed in accordance with the 2016 Position.