Section 2 - Conditions to be met to satisfy the test

Last updated 4 December 2006

A CFC has to satisfy the following five conditions to pass the active income test:

Is it a resident of a foreign country?
Does it have a permanent establishment in its country of residence?
Does it keep proper records?
Can it substantiate your claim that it has met the active income test?
Is its tainted income ratio less than 5%?

Condition 1 - Is the CFC a resident of a foreign country?

Condition 2 - Does the CFC have a permanent establishment in its country of residence?

Condition 3 - Does the CFC keep proper records?

Condition 4 - Have the substantiation requirements been met?

Condition 5 - Tainted income ratio less than 5%

QC18000