Foreign Affiliate Definition

Foreign affiliate trade statistics (FATS), also known as transnational corporation (TNC) data details the economic operations of foreign direct investment-based enterprises.

Collection of such information, and aggregation at the national level, can provide economists and policymakers with insight as to the relationship that transnational corporations, being FDI-related enterprises, have on economies.

FATS indicators - including:

Abstract:
The Canadian foreign affiliate rules in the Income Tax Act include a number of share exchange rollovers that permit Canadian taxpayers to reorganize their foreign affiliate groups without triggering foreign accrual property income (FAPI). These include subsection 88(3), which governs liquidations of top-tier foreign affiliates; paragraphs 95(2)(e) and (e.1), which govern liquidations of lower-tier foreign affiliates; and paragraphs 95(2)(d) and (d.1), which govern mergers of foreign affiliates. Generally, these rules provide rollover treatment for all dispositions of foreign affiliate shares, regardless of their excluded-property status. The February 27, 2004 draft legislation contains extensive proposed changes to the foreign affiliate rules, including changes that would eliminate the foreign affiliate liquidation and merger rollovers for dispositions of non-excluded-property foreign affiliate shares. Subsequent comments from the Department of Finance indicate that further modifications to these proposals are being considered. With a rethinking of the foreign affiliate reorganization rules in progress, the author takes the opportunity to re-examine the purpose of these provisions from a tax policy perspective and to suggest a framework for their redesign. The author places the proposed foreign affiliate reorganization rules in context. He reviews the policy objectives of the FAPI rules as anti-avoidance provisions and the role of the foreign affiliate share exchange rollovers within the FAPI system. The current foreign affiliate liquidation and merger rollovers are analyzed and compared with the proposed versions. The author then sets out a tax policy framework that supports continued broad rollover relief from FAPI for foreign affiliate share exchange reorganizations. This framework is based principally on the realization principle - share exchange transactions should not give rise to a tax liability in respect of FAPI, regardless of the excluded-property status of the exchanged foreign affiliate shares. The author concludes with a recommended approach to amend the foreign affiliate liquidation and merger rules, so as to maintain consistency with the realization principle and bring the foreign affiliate share exchange rollover rules into conformity with the domestic share exchange rollover rules.