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Highlights
REPATRIATION STRUCTURES
Canada Revenue Agency Rulings Signal Further Comfort With
Repatriation Structures
Chris Van Loan, Josh Jones
Many multinational corporations with one or more Canadian subsidiaries had, in the past, established a foreign financing company as a subsidiary of a Canadian company. Such financing subsidiary would lend to other non-Canadian operating companies within the multinational corporation's group. This "second-tier financing" structure allowed the foreign parent to redeploy excess funds in its Canadian subsidiary elsewhere in its global corporate group without having the Canadian subsidiary pay a dividend to its foreign parent which dividend would be subject to withholding tax. Legislative changes and challenges of some of these structures by the Canada Revenue Agency ("CRA") have largely curtailed the use of such arrangements. However, as Chris Van Loan and Josh Jones explain, recent rulings from the CRA likely signal that it is becoming increasingly comfortable with such structures.
CANADA-U.S. TREATY
Inbound Financing Through the United States
Ian J. Gamble
In Advance Income Tax Ruling 2009-0349141R3 (the "Ruling"), the Canada Revenue Agency ("CRA") ruled that foreign-controlled Canadian operations could be financed through a back-to-back loan arrangement from the U.S. group and could benefit from the zero withholding tax rate on interest (paid from the Canadian group to the U.S. group) under the Canada-U.S. tax treaty (the "Treaty"). As Ian Gamble explains, the Ruling adds to our understanding of how the CRA will apply the provisions of the Treaty (as amended by the Fifth Protocol) and represents a concrete example of the CRA's most recent administrative policy on the "back-to-back loan rule" in the thin capitalization provisions of the Canadian Income Tax Act.
MERGERS AND AMALGAMATIONS
Is a Foreign Merger an Amalgamation?
Marc N. Ton-That, Rebecca Chan
The term "amalgamation" is referred to frequently in the Income Tax Act, but the term itself is not defined. Marc Ton-That and Rebecca Chan discuss whether a foreign merger is considered an amalgamation for purposes of Canadian tax law. Generally, the term "amalgamation" is used to refer to a corporate combination effected under Canadian law, whereas the term "merger" is commonly used to describe a corporate combination in foreign jurisdictions. There is no provision in the Income Tax Act that defines a merger or an amalgamation and it is not certain that an amalgamation excludes a foreign merger. The authors argue that the term "amalgamation" should include foreign mergers in certain circumstances.
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Board
Jeffrey G. MacIntosh
Editor-in-Chief
Faculty of Law, University of Toronto
Graham P.C. Gow
McCarthy Tétrault LLP
Martin Elliot Kovnats
Aird & Berlis LLP
C. Ian Kyer
Fasken Martineau DuMoulin LLP
Alison R. Manzer
Cassels Brock & Blackwell LLP
Neill May
Goodmans LLP
Rosemary Newman
Davies Ward Phillips & Vineberg LLP
Lydia Salvi
Baker & McKenzie LLP
Jeffrey Singer
Stikeman Elliott LLP
Philippe Tardif
Borden Ladner Garvais LLP
Chris Van Loan
Blake, Cassels & Graydon LLP
Robert M. Yalden
Osler, Hoskin & Harcourt LLP
Ava G. Yaskiel
Ogilvy Renault LLP |