Dear Sirs:
Re: Paragraph 212(1)(b) Postamble Request for Technical Interpretation
This is in reply to your letter dated February 22, 1991 requesting a technical interpretation on the application of the postamble of paragraph 212(1)(b) of the Income Tax Act (the "Act).
Specifically, you have asked us to confirm your view that interest which fluctuates based on the fluctuation of a foreign currency would not be included within the scope of the phrase "or any other similar criterion" found in the postamble of paragraph 212(1)(b) of the Act. In support of this conclusion you point out that paragraph 94.1(b) of the Act distinguishes between portfolio investments in commodities and in a currency of a country other than Canada, ie. a currency of a country other than Canada would not be the same type of financial instrument as a commodity.
We provide the following general comments.
Whether interest is "computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion" within the meaning of paragraph 212(1)(b) of the Act is a question of fact that can only be determined with full knowledge of ail of the particulars of the situation.
While it may be arguable that the fluctuation in a commodity price and the fluctuation in a foreign currency would not be considered the same criterion with reference to which interest could be computed, it is our opinion that they could fall within the term "similar criteria".
We hope our comments are of assistance.
Yours truly,
for DirectorReorganization and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch