A foreign subsidiary of Canco (Opco) in turn wholly-owned a non-resident “Finco,” which made an interest-free loan to a non-resident sister of Canco (Foreign Sub), that was repaid within two years. The benefit imputed under s. 80.4(2) from the absence of interest was, in turn, deemed by s. 15(9) to be a benefit conferred on “a” shareholder, which CRA interpreted as being Foreign Sub. S. 214(3)(a) then deemed this benefit to be paid “to the taxpayer as a dividend from a corporation resident in Canada.” CRA considered Foreign Sub to be the “taxpayer” and effectively treated Finco as the deemed corporation resident in Canada, stating:
As the “shareholder” in subsection 15(1), Foreign Sub would be the taxpayer who is deemed to have received the dividend under paragraph 214(3)(a), and it is therefore Foreign Sub who is liable for the withholding tax imposed under subsection 212(2).
Accordingly, Finco was liable under s. 215(1) for failure to “withhold” and remit Part XIII tax on the imputed benefit.