28 May 2025 IFA Roundtable, Q.3

CRA indicated that anticipated frequent and ongoing movements in the account balances of participants to a notional cash-pooling arrangement would likely be considered to form part of a series of loans, repayments, and other transactions for s. 15(2.6) purposes.

CRA then provided the following simple example illustrating the application of the back-to-back rules in ss. 15(2.16) to (2.19) to a notional cash-pooling arrangement involving Canco and two affiliated foreign companies in the pool (Forco1 and Forco2). The 2^nd, 3^rd and 4^th columns show amounts advanced into the pool (if positive) or taken out of the pool (if negative) by Canco, Forco1 and Forco2, respectively, and the 5^th column shows the net amount on deposit with the group bank.

In the course of discussion of a physical, then a notional cash-pooling arrangement between a Canadian company and affiliated foreign companies, CRA indicated that:

• the automatic cash sweeps that occur as part of a physical cash-pooling arrangement would likely be considered to form part of the series described in s. 15(2.6), which would render the s. 15(2.6) exception unavailable (so that withholding under s. 214(3)(a) would not be refunded).
• similarly, the anticipated frequent and ongoing movements in the account balances of participants to a notional cash-pooling arrangement would likely be considered to form part of a series of loans, repayments, and other transactions.

After indicating that frequent anticipated payments and repayments occurring in a cross-border physical or notional cash-pooling arrangement likely would be a s. 15(2.6) series (so that the s. 15*2.6) exception for repayments likely would not apply and withholding under s. 214(3)(a) likely would not be refunded), CRA noted that another exception to the application of the joint application of ss. 15(2) and 214(3) is the PLOI election under s. 15(2.11). The election must be jointly filed by the Canadian resident and its non-resident parent.

The CRA Compliance Programs Branch will announce the details of a simplified PLOI election on CRA's website.