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Unformatted text preview: austriaco, swissco, and us Holdco are not qualifying persons.
However, although us Opco is not a qualifying person, it may still be entitled to treaty benefits under the active trade or business test in respect of the interest income derived from Canco if:
n us Opco or a related person (such as usco) is engaged in the active conduct of a trade or business in the united states, the interest income is derived by us Opco in connection with or is incidental to this trade or business, and
n the trade or business is substantial in relation to the activity carried out in Canada.
n because us Opco is engaged in the active conduct of a trade or business in the united states, the first condition should be met. although the us tax authorities may consider the interest income to be derived by us Opco in connection with or incidental to this trade or business, it is unclear whether the Canadian tax authorities will take the same view. in fact, the Canadian tax authorities may determine that only the returns from the short-term investment of cash from us Opco that is temporarily surplus to its business constitute active business income...
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