CRA provides an opinion on the application of s. 214(15)(c) to creditor consent fees

CRA has issued rulings respecting a situation where a Canadian corporate issuer had issued Canadian and U.S. dollar-denominated bonds and notes to arm's length lenders (the “debtholders”), and used the proceeds to invest in “mirror loans” (i.e., with substantially the same terms) issued by an affiliated limited partnership (LP).

The proposed transactions entailed minor amendments to the terms of the mirror loans, followed by their distribution to the debtholders in full satisfaction of the amounts owing to them under the bonds and notes.

The various rulings included a ruling on how s. 39(2) should be applied to the issuer respecting its settlement of the U.S.-dollar notes if there was a forgiven amount arising on such settlement, as determined based on the FMV of the mirror loans transferred in satisfaction of those notes (see the discussion at 13 May 2026 IFA Roundtable Q. 5, 2025-1078201C6).

CRA also issued an opinion based on what then was a draft version of s. 214(15)(c) (respecting restructuring and rescheduling fees) that consent fees paid to the debtholders would be deemed to be interest, so that s. 212(1)(i) would not apply and so there would be no withholding tax on such deemed interest.

Neal Armstrong. Summary of 2025 Ruling 2024-1002911R3 under s. 39(2).