(a.1) in computing the income from a business other than an active business for a taxation year of a foreign affiliate of a taxpayer there shall be included the income of the affiliate for the year from the sale of property (which, for the purposes of this paragraph, includes the income of the affiliate for the year from the performance of services as an agent in relation to a purchase or sale of property) where
	(i) it is reasonable to conclude that the cost to any person of the property (other than property that was manufactured, produced, grown, extracted or processed in Canada by the taxpayer or a person with whom the taxpayer does not deal at arm's length in the course of carrying on a business in Canada and that was sold to non-resident persons other than the affiliate or sold to the affiliate for sale to non-resident persons) is relevant in computing the income from a business carried on by the taxpayer or a person resident in Canada with whom the taxpayer does not deal at arm's length or is relevant in computing the income from a business carried on in Canada by a non-resident person with whom the taxpayer does not deal at arm's length, and
	(ii) the property was not manufactured, produced, grown, extracted or processed in the country under whose laws the affiliate was formed or continued and exists and is governed and in which the affiliate's business is principally carried on,
	unless more than 90% of the gross revenue of the affiliate for the year from the sale of property is derived from the sale of such property (other than a property described in subparagraph (ii) the cost of which to any person is a cost referred to in subparagraph (i)) to persons with whom the affiliate deals at arm's length (which, for this purpose, includes a sale of property to a non-resident corporation with which the affiliate does not deal at arm's length for sale to persons with whom the affiliate deals at arm's length) and, where this paragraph applies to include income of the affiliate from the sale of property in the income of the affiliate from a business other than an active business,
	(iii) the sale of such property shall be deemed to be a separate business, other than an active business, carried on by the affiliate, and
	(iv) any income of the affiliate that pertains to or is incident to that business shall be deemed to be income from a business other than an active business;
	(a.2) in computing the income from a business other than an active business for a taxation year of a foreign affiliate of a taxpayer there shall be included the income of the affiliate for the year from the insurance of a risk (which, for the purposes of this paragraph, includes income of the affiliate for the year from the reinsurance of a risk) where the risk was in respect of
	(i) a person resident in Canada,
	(ii) a property situated in Canada, or
	(iii) a business carried on in Canada
	unless more than 90% of the gross premium revenue of the affiliate for the year from the insurance of risks (net of reinsurance ceded) was in respect of the insurance of risks (other than risks in respect of a person, a property or a business described in subparagraphs (i) to (iii)) of persons with whom the affiliate deals at arm's length and, where this paragraph applies to include income of the affiliate from the insurance of risks in the income of the affiliate from a business other than an active business,
	(iv) the insurance of those risks shall be deemed to be a separate business, other than an active business, carried on by the affiliate, and
	(v) any income of the affiliate that pertains to or is incident to that business shall be deemed to be income from a business other than an active business;
	(a.3) in computing the income from a business other than an active business for a taxation year of a foreign affiliate of a taxpayer there shall be included the income of the affiliate for the year derived directly or indirectly from indebtedness (other than a specified deposit with a prescribed financial institution) and lease obligations (which, for the purposes of this paragraph, includes the income of the affiliate for the year from the purchase and sale of indebtedness and lease obligations on its own account)
	(i) of persons resident in Canada, or
	(ii) in respect of businesses carried on in Canada
	unless more than 90% of the gross revenue of the affiliate derived directly or indirectly from indebtedness (other than a specified deposit with a prescribed financial institution) and lease obligations was derived directly or indirectly from indebtedness and lease obligations of non-resident persons with whom the affiliate deals at arm's length and, where this paragraph applies to include income of the affiliate for the year in the income of the affiliate from a business other than an active business,
	(iii) those activities carried out to earn such income shall be deemed to be a separate business, other than an active business, carried on by the affiliate, and
	(iv) any income of the affiliate that pertains to or is incident to that business shall be deemed to be income from a business other than an active business;
	(a.4) in computing the income from a business other than an active business for a taxation year of a foreign affiliate of a taxpayer there shall be included (to the extent not included under paragraph (a.3) in such income of the affiliate for the year) that proportion of the income of the affiliate for the year derived directly or indirectly from indebtedness and lease obligations (which, for the purposes of this paragraph, includes the income of the affiliate for the year from the purchase and sale of indebtedness and lease obligations on its own account) in respect of a business carried on outside Canada by a partnership (any portion of the income or loss of which for fiscal periods of the partnership that end in the year is included or would, if the partnership had an income or loss for such fiscal periods, be included directly or indirectly in computing the income or loss of the taxpayer or a person resident in Canada with whom the taxpayer does not deal at arm's length) that
	(i) the total of all amounts each of which is the income or loss of the partnership for fiscal periods of the partnership that end in the year that are included directly or indirectly in computing the income or loss of the taxpayer or a person resident in Canada with whom the taxpayer does not deal at arm's length
	is of
	(ii) the total of all amounts each of which is the income or loss of the partnership for fiscal periods of the partnership that end in the year
	unless more than 90% of the gross revenue of the affiliate derived directly or indirectly from indebtedness and lease obligations was derived directly or indirectly from indebtedness and lease obligations of non-resident persons with whom the affiliate deals at arm's length (other than indebtedness and lease obligations of a partnership described in this paragraph) and where this paragraph applies to include a proportion of the income of the affiliate for the year in the income of the affiliate from a business other than an active business
	(iii) those activities carried out to earn such income of the affiliate for the year shall be deemed to be a separate business, other than an active business, carried on by the affiliate, and
	(iv) any income of the affiliate that pertains to or is incident to that business shall be deemed to be income from a business other than an active business
	and for the purpose of this paragraph, where the income or loss of a partnership for a fiscal period that ends in the year is nil, the proportion of the income of the affiliate that is to be included in the income of the affiliate for the year from a business other than an active business shall be determined as if the partnership had income of $1,000,000 for that fiscal period;
	(5) Subsection 95(2) of the Act is amended by striking out the word ``and'' at the end of paragraph (i) and by adding the following after paragraph (j):
	(k) where, in a particular taxation year, a foreign affiliate of a taxpayer
	(i) carries on an investment business outside Canada and, in the preceding taxation year, that business was not an investment business of the affiliate (or the definition ``investment business'' in subsection (1) did not apply in respect of the business in the preceding taxation year), or
	(ii) is deemed by paragraph (a.1), (a.2), (a.3) or (a.4) to carry on a separate business, other than an active business, and, in the preceding taxation year, that paragraph did not apply to deem the affiliate to be carrying on that separate business,
	for the purpose of computing the income of the affiliate from the investment business or the separate business as the case may be (in this subsection referred to as the ``foreign business'') for the particular year and each subsequent taxation year in which the foreign business is carried on,
	(iii) the affiliate shall be deemed
	(A) to have begun to carry on the foreign business in Canada at the later of the time the particular year began or the time that it began to carry on the foreign business, and
	(B) to have carried on the foreign business in Canada throughout that part of the particular year and each such subsequent taxation year in which the foreign business was carried on by it,
	(iv) where the foreign business of the affiliate is a business in respect of which, if the foreign business were carried on in Canada, the affiliate would be required by law to report to a regulating authority in Canada such as the Superintendent of Financial Institutions or a similar authority of a province, the affiliate shall be deemed to have been required by law to report to and to have been subject to the supervision of such regulating authority, and
	(v) paragraphs 138(11.91)(c) to (f) apply to the affiliate for the particular year in respect of the foreign business as if
	(A) the affiliate were the insurer referred to in subsection 138(11.91),
	(B) the particular year of the affiliate were the particular year of the insurer referred to in that subsection, and
	(C) the foreign business of the affiliate were the business of the insurer referred to in that subsection;
	(l) in computing the income from property for a taxation year of a foreign affiliate of a taxpayer there shall be included the income of the affiliate for the year from a business (other than an investment business of the affiliate) the principal purpose of which is to derive income from trading or dealing in indebtedness (which for the purpose of this paragraph includes the earning of interest on indebtedness) other than
	(i) indebtedness owing by persons with whom the affiliate deals at arm's length who are resident in the country in which the affiliate was formed or continued and exists and is governed and in which the business is principally carried on, or
	(ii) trade accounts receivable owing by persons with whom the affiliate deals at arm's length,
	unless
	(iii) the business is carried on by the affiliate as a foreign bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities, the activities of which are regulated in the country under whose laws the affiliate was formed or continued and exists and is governed and in which the business is principally carried on, and
	(iv) the taxpayer is
	(A) a bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities resident in Canada, the business activities of which are subject by law to the supervision of a regulating authority such as the Superintendent of Financial Institutions or a similar authority of a province,
	(B) a subsidiary wholly-owned corporation of a corporation described in clause (A), or
	(C) a corporation of which a corporation described in clause (A) is a subsidiary wholly-owned corporation; and
	(m) a taxpayer has a qualifying interest in respect of a foreign affiliate of the taxpayer at any time if, at that time, the taxpayer owned
	(i) not less than 10% of the issued and outstanding shares (having full voting rights under all circumstances) of the affiliate, and
	(ii) shares of the affiliate having a fair market value of not less than 10% of the fair market value of all the issued and outstanding shares of the affiliate
	and for the purpose of this paragraph
	(iii) where, at any time, shares of a corporation are owned or are deemed for the purposes of this paragraph to be owned by another corporation (in this paragraph referred to as the ``holding corporation''), those shares shall be deemed to be owned at that time by each shareholder of the holding corporation in a proportion equal to the proportion of all such shares that
	(A) the fair market value of the shares of the holding corporation owned at that time by the shareholder
	is of
	(B) the fair market value of all the issued shares of the holding corporation outstanding at that time,
	(iv) where, at any time, shares of a corporation are property of a partnership or are deemed for the purposes of this paragraph to be property of a partnership, those shares shall be deemed to be owned at that time by each member of the partnership in a proportion equal to the proportion of all such shares that
	(A) the member's share of the income or loss of the partnership for its fiscal period that includes that time
	is of
	(B) the income or loss of the partnership for its fiscal period that includes that time
	and for the purpose of this subparagraph, where the income and loss of the partnership for its fiscal period that includes that time are nil, that proportion shall be computed as if the partnership had income for the period in the amount of $1,000,000, and
	(v) where, at any time, a person is a holder of convertible property issued by the affiliate before June 23, 1994 the terms of which confer on the holder the right to exchange the convertible property for shares of the affiliate and the taxpayer elects in its return of income for its first taxation year that ends after 1994 to have the provisions of this subparagraph apply to the taxpayer in respect of all the convertible property issued by the affiliate and outstanding at that time, each holder shall, in respect of the convertible property held by it at that time, be deemed to have, immediately before that time,
	(A) exchanged the convertible property for shares of the affiliate, and
	(B) acquired shares of the affiliate in accordance with the terms and conditions of the convertible property.
	(6) Section 95 of the Act is amended by adding the following after subsection (2):
Rule for definition ``investment business''	(2.1) For the purposes of the definition ``investment business'' in subsection (1), a foreign affiliate of a taxpayer, the taxpayer and, where the taxpayer is a corporation all the issued shares of which are owned by a corporation described in subparagraph (a)(i), such corporation described in subparagraph (a)(i) shall be considered to be dealing with each other at arm's length in respect of the entering into of agreements that provide for the purchase, sale or exchange of currency and the execution of such agreements where
	(a) the taxpayer is
	(i) a bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities resident in Canada, the business activities of which are subject by law to the supervision of a regulating authority such as the Superintendent of Financial Institutions or a similar authority of a province, or
	(ii) a subsidiary wholly-owned corporation of a corporation described in subparagraph (i);
	(b) the agreements are swap agreements, forward purchase or sale agreements, forward rate agreements, futures agreements, options or rights agreements or similar agreements;
	(c) the agreements are entered in the course of a business carried on by the affiliate principally with persons with whom the affiliate deals at arm's length in the country under whose laws the affiliate was formed or continued and exists and is governed and in which the business is principally carried on; and
	(d) the terms and conditions of such agreements are substantially the same as the terms and conditions of similar agreements made by persons dealing at arm's length.
Rule for para- graph (2)(a)	(2.2) For the purpose of paragraph (2)(a),
	(a) a non-resident corporation that was not a foreign affiliate of a taxpayer in respect of which the taxpayer had a qualifying interest throughout a particular taxation year shall be deemed to be a foreign affiliate of a taxpayer in respect of which the taxpayer had a qualifying interest throughout that year where
	(i) a person has, in that year, acquired or disposed of shares of that non-resident corporation or any other corporation and, because of that acquisition or disposition, that non-resident corporation became or ceased to be a foreign affiliate of the taxpayer in respect of which the taxpayer had a qualifying interest, and
	(ii) at the beginning of that year or at the end of that year, the non-resident corporation was a foreign affiliate of the taxpayer in respect of which the taxpayer had a qualifying interest; and
	(b) a non-resident corporation that was not related to a foreign affiliate of a taxpayer and the taxpayer throughout a particular taxation year shall be deemed to be related to the foreign affiliate of the taxpayer and that taxpayer throughout that year where
	(i) a person has, in that year, acquired or disposed of shares of that non-resident corporation or any other corporation and, because of that acquisition or disposition, that non-resident corporation became or ceased to be a non-resident corporation that was related to the foreign affiliate of the taxpayer and the taxpayer, and
	(ii) at the beginning of that year or at the end of that year, the non-resident corporation was related to the foreign affiliate of the taxpayer and the taxpayer.
Application of paragraph (2)(a.1)	(2.3) Paragraph (2)(a.1) does not apply to a foreign affiliate of a taxpayer in respect of a sale or exchange of property that is currency or a right to purchase, sell or exchange currency where
	(a) the taxpayer is
	(i) a bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities resident in Canada, the business activities of which are subject by law to the supervision of a regulating authority such as the Superintendent of Financial Institutions or a similar authority of a province, or
	(ii) a subsidiary wholly-owned corporation of a corporation described in subparagraph (i);