• Service: Tax, International Tax
  • Type: Regulatory update
  • Date: 8/23/2013

Canada - Proposed changes to foreign affiliate dumping rules 

August 23: Canada’s Department of Finance on 16 August 2013 released a 26-page package of amendments to the foreign affiliate dumping rules—nine pages of draft legislation and 17 pages of explanatory notes.

Comments concerning the draft legislation are due by 15 October 2013.

Canada’s foreign affiliate dumping rules were originally introduced in the 2012 federal budget. An amended version of the rules was enacted in Bill C-45 in December 2012.

The proposed changes would:

  • Reduce impediments to corporate acquisitions by limiting the application of the rules when 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, when 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

Read an August 2013 report prepared by the KPMG member firm in Canada: Foreign Affiliate Dumping Rules - New Relieving Measures Proposed

Read also an August 2013 report prepared by the KPMG member firm in Canada: Welcome Changes to FA Dumping Rules

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