The activities of a limited partnership (“Foreign LP), governed by foreign or provincial law are lending to borrowers that are resident in and outside Canada. The general partner (“GP”) has delegated all its functions regarding the investment activities of Foreign LP to an affiliate (the “Manager”), which is also a taxable Canadian corporation. All the limited partners are non-residents or partnerships other than Canadian partnerships. None is affiliated with any of GP, the Manager, or any person or partnership described in s. 115.2(2)(c)(ii)(A) or (B). Their only connection to Canada is their investment in Foreign LP.
CRA stated:
[A]ny ancillary services provided by the Manager in Canada that may fall outside the scope of “qualified [sic] investment services” in subsection 115.2(1), but that are administrative in nature and not an income generating activity would generally not be determinative on their own of the location where the business of Foreign LP is carried on. Therefore, where a non-resident limited partner is not considered to be carrying on business in Canada, by reason of the application of subsection 115.2(2) or otherwise, the non-resident limited partner will not be considered to be carrying on a business in Canada solely by reason of the Manager performing administrative functions in Canada.
Finally, the fact that GP, a corporation resident in Canada, performs administrative functions in Canada would not generally, in and by itself, cause Foreign LP or its limited partners to be carrying on business in Canada for the purposes of the Act where, once subsection 115.2(2) has been applied to disregard the activities conducted on behalf of Foreign LP by the Manager, the remaining activities of Foreign LP would not amount to carrying on business in Canada for the purposes of the Act.