In order to obtain the agreement of arm’s length non-resident financial institutions to a sale of the shares of Canco to the non-resident purchaser, Canco paid “Consent Fees” to them, which were calculated as a percentage of the amount owing under each Credit Agreement. In finding that the Consent Fees were not management fees, the Directorate stated:
The Minister of Finance said at the time of the enactment of paragraph 212(1)(a) that… a management or administration fee or charge is to be regarded as an amount paid for advice or direction pertaining to the operation or administration of a company, not including an amount paid for services to an independent firm and, per subsection 212(4), not including specified amounts paid for identifiable services such as transportation, insurance, advertising, accounting and research. …
[T]he Consent Fees are not management or administrative fees or charges…[and] are simply paid to retain the outstanding Credit Agreements.