Control for FAPI purposes

Control in the case of a foreign affiliate has rules all of its own.

FAPI must be reported if you have a Controlled Foreign Affiliate (CFA).  To have a CFA, first you must have a Foreign Affiliate (FA).

To have an FA is a fairly easy calculation.  If you own at least 1% of the the foreign corporation and you plus related persons own at least 10% of that corporation then you have an FA.

So when does an FA become a CFA?

There are four different situations that will result in a CFA.

1.  The first is easy - if you control the corporation you have a CFA.

2.  If you combine your shares and the shares belonging to persons related to you and get control, then you have a CFA. 

3.  If you combine your shares, the shares belonging to persons related to you and all the shares of four other Canadian residents and you get control, then you have a CFA.

4.  If you combine your shares, the shares belonging to persons related to you, the shares of four other Canadian residents and all the shares of people related to them and you get control, then you have a CFA.

All of the situations above are flow-through calculations (if you own the shares of the company that owns the shares, you are deemed to own those shares).  Also remember that persons and Canadian residents can be corporations.

So, you can see that "control" for FAPI purposes catches a much wider net that control under the Income Tax Act for other situations.