Large Corporations Tax Long-Term Debt
Paragraph 42 of Interpretation Bulletin IT-532, Part I.3 Tax on Large Corporations , comments on the meaning of “long-term debt” of a financial institution for Part I.3 of the Income Tax Act (the Act) purposes. In particular, it indicates that a subordinated indebtedness issued for not less than 5 years but that may be retired before the 5-year term has expired is not considered long-term debt. We have reviewed this position and it is now our view that, while the terms and conditions of a debt may contain a provision for the retirement of the debt within 5 years, the debt would meet the definition of “long-term debt” in subsection 181(1) of the Act since the debt has nonetheless been issued for a term that is not less than 5 years.
As a result of our revised position, a financial institution, which has issued a debenture such as the one described above, would include the amount of the debenture in computing its capital as long-term debt under subparagraph 181.3(3)(a)(i) of the Act and a corporation that is not a financial institution would be entitled to claim an investment allowance in respect of the debenture pursuant to paragraph 181.2(4)(d) of the Act.
Link to Source: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/itnews-28/archived-income-tax-technical-news-no-28.html#P18_706