1 May 2009 CLHIA Roundtable Q. 12, 2009-0317191C6 - CLHIA Roundtable Question #12- 95(2)(a)(ii)(D) -- summary under Clause 95(2)(a)(ii)(D)

Respecting a situation where Borrower and Subsidiary are resident in Country A and are liable to tax on a worldwide basis in Country B, CRA stated "it is our view that 'subject to income taxation' means that all the income earning activities of the corporation fall under the taxing jurisdiction of the relevant country. A corporation would be subject to income taxation notwithstanding that it does not pay any tax in a particular year because it has incurred a loss or because it has losses of other years available to us at net income that would otherwise be taxable." Furthermore, "if Borrower and Subsidiary, which are resident in Country A for tax purposes, elect to be taxed as a resident in the United States under subsection 953(d) of the IRC, and are consequently taxable on their worldwide income in United States, it would still be necessary to determine whether each corporation was subject to income taxation in Country A."