Is the Elephant Finally Out of the Room?

By: Nick Pantaleo

The comments started coming in not long after the Minister stood up in the House of Commons and the budget papers became available. 

“Happy now?” someone emailed.  “Looks like you guys got what you wanted,” another observed. Others asked, “Is this really what the Panel recommended?”

Loan from FA and Thin Cap – Budget Proposal

By: Melanie Huynh

Currently, interest paid by a Canco to a controlled foreign affiliate (CFA) could be subject to the thin capitalization rule in 18(4).  This may result in a denial of some or all of Canco’s interest expense, while the interest income earned by the CFA is taxed in Canada as FAPI, giving rise to double taxation.

Under the March 2012 budget proposal, Canco’s interest deduction is not denied, but only to the extent that the FAPI, net of related deduction under 91(4), is included in Canco’s income. Although the proposal is welcome, further fine tuning is needed to properly address the double taxation issue.