PWC, "Tax Insights: Excessive interest and financing expenses limitation (EIFEL) regime", Issue 2022-06, 15 February 2022

Summary Under
Tax Topics - Income Tax Act - Section 18.2 - Subsection 18.2(1) - Excluded Entity

Low de minimis threshold

  • The “excluded entity” definition in draft s. 18.2(1), which includes groups of corporations and trusts whose...

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Summary Under
Tax Topics - Income Tax Act - Section 18.2 - Subsection 18.2(2)

Unclear whether s. 18.2 applies to computing FAPI

  • It is unclear whether the rules apply to computing the income of a foreign affiliate, which is...

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Summary Under
Tax Topics - Income Tax Act - Section 18.2 - Subsection 18.2(1) - Adjusted Taxable Income - A

Double-deductions of non-capital losses

  • Item A in the ATI formula is reduced by the non-capital loss and net capital loss generated for the...

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Summary Under
Tax Topics - Income Tax Act - Section 18.2 - Subsection 18.2(1) - Interest and Financing Expenses - A - Paragraph (d)

Potential inclusion of amounts under derivatives

  • The definitions of interest and financing expenses and revenues, as supplemented by the...

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Summary Under
Tax Topics - Income Tax Act - Section 18.2 - Subsection 18.2(3)

Effect of increasing future recapture

  • Draft s. 18.2(3) deems amounts of previously capitalized interest that are otherwise deductible as CCA or...

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Summary Under
Tax Topics - Income Tax Act - Section 18.2 - Subsection 18.2(1) - Excluded Interest

General scope of excluded interest rules

  • The “excluded interest” rules depart from the 2021 federal budget proposals (which stated that...

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Summary Under
Tax Topics - Income Tax Act - Section 18.21 - Subsection 18.21(1) - Acceptable Accounting Standards

Non-recognition of local European GAAP

  • The group ratio rule in draft s. 18.21, which may enable taxpayers to access a higher fixed percentage...

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Summary Under
Tax Topics - Income Tax Act - Section 18.21 - Subsection 18.21(2)

Potential difficulties in annually assessing whether the election should be made or is practicable

  • Application of the group ratio regime requires...

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Summary Under
Tax Topics - Income Tax Act - Section 18.2 - Subsection 18.2(4) - Paragraph 18.2(4)(c)

Difficulties for consolidated operation of financial services groups

  • S. 18.2(4)(c), which effectively prevents a “relevant financial...

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