Does CRA still follow 9521415? In particular:
- Does the s. 18(5) definition of "specified shareholder" require a person to own shares of the corporation?
- Is contributed surplus contributed by a person that was a specified non-resident shareholder at the time of the contribution included in the calculation of the s. (a)(ii) average in the “equity amount” definition where it is no longer a specified non-resident shareholder at the time the s. 18(4) calculation is made?
CRA indicated that, in general, a specified shareholder is a person who, either alone or together with persons with whom it does not deal at arm’s length, owns shares representing either 25% or more of the voting rights or 25% or more of the FMV of all the issued and outstanding shares.
Consistently with 9521415, it remains CRA’s view that: that person must own at least one share in order to be a specified shareholder; and, in order to be included in the average referred to in the equity amount definition, the contributed surplus must have been contributed by a person that is a specified non-resident shareholder at the time the thin capitalization computation is made, i.e., at the end of the taxation year.
In order to be included in the determination of the monthly average under s. (a)(ii) of the “equity amount” definition, the contributions must also have been contributed by a specified non-resident shareholder at the beginning of the month for which an amount is so determined.