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Foreign Affiliate Dumping Rules - New Relieving Measures Proposed 

Global Tax Adviser


August 20, 2013


Dave Beaulne
GTA, International Corporate Tax


The Department of Finance released a 26-page package of amendments to the foreign affiliate dumping rules on August 16, 2013. In the release, which contains nine pages of draft legislation and 17 pages of explanatory notes, Finance invites stakeholders to comment on the draft legislation by October 15, 2013.

The foreign affiliate dumping rules were originally introduced in the 2012 federal budget. An amended version of the rules was enacted in Bill C-45 on December 14, 2012.


Draft legislation
According to Finance, the legislative proposals will:


  • Reduce impediments to corporate acquisitions by limiting the application of the rules where a corporation resident in Canada (CRIC) makes an investment in a foreign affiliate before that corporation becomes controlled by a non-resident corporation
  • Extend the rule reinstating a CRIC's paid-up capital, where the CRIC distributes to its non-resident shareholder amounts it has received as interest on or from the repayment or sale of certain debt obligations owed to the CRIC by the foreign affiliate
  • Ease compliance requirements by making the "paid-up capital offset" rule apply automatically
  • Facilitate certain financing arrangements by amending the computation of the CRIC's debt for the purpose of determining the CRIC's debt-to-equity ratio under the thin capitalization rules.


Finance also notes that the proposals include anti-avoidance rules to prevent taxpayers from using certain relieving provisions within these rules in a manner that is inconsistent with the underlying policy by, for example, undertaking transactions to take advantage of both the corporate reorganization provision and the exception from the rules for certain debts.


For more information, contact your KPMG adviser.






Information is current to August 20, 2013. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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