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:
Respecting whether the Consent Fees would be deemed interest under s. 214(15), the Directorate stated:
Paragraph 214(15)(a) only applies to guarantee fees.
In any case, since Canco and the Lenders are at arm’s length, the Consent Fees would not be subject to Part XIII tax because of subparagraph 212(1)(b)(i) even if subsection 214(15) deemed them to be interest.