A non-resident corporation (the “Taxpayer”), which filed a return under s. 216, took the position that the rules in s. 18(4) (the “Rules”) did not apply to it in light of the fact that 2013 amendments did not apply to taxation years that began before 2014 (a position contrary to 9638945). CRA stated:
Where a non-resident person elects to file a return of income under section 216, the person becomes liable for Part I tax on the income in question “as though the non-resident person were a person resident in Canada.” Therefore, provisions that could apply to calculate the Part I tax of a Canadian resident, including subsection 18(4), will also apply to any non-resident who makes an election under subsection 216(1). There was nothing in the Amendments to indicate that the Rules only apply to such corporations from the effective date of the Amendments, i.e., to taxation years that begin after 2013. Rather, the Amendments provide a specific formula for computing the equity amounts of such corporations for the purposes of applying the Rules. In summary… the Rules apply to the Taxpayer’s interest expense claimed in its 2013-2014 taxation year.