PwC’s submission on federal budget proposals regarding “foreign affiliate dumping” and “thin capitalization rules”

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Read PwC’s submission on 2012 federal budget proposals regarding “foreign affiliate dumping” (FA Dumping Proposals) and “thin capitalization rules” referred to in the Notice of Ways and Means Motion.

The budget documents explain that the FA Dumping Proposals are directed at certain transactions that erode the Canadian corporate tax base. The example transaction referred to in the budget documents is a “debt dumping” transaction. However, the budget documents go on to set out other examples of so-called “foreign affiliate dumping” transactions which include the acquisition by a Canadian subsidiary (CRIC) of a foreign company of existing or newly issued foreign affiliate shares from a third party or related party using internally generated or borrowed funds. The Notices of Ways and Means Motions released with the budget papers demonstrate the FA Dumping Proposals are also intended to target the assumption or acquisition of interest bearing debt to an affiliate, even if the terms are arm’s length.

Read our submission to learn more.