EY, "Proposed EIFEL rules", Tax Alert 2022 No. 13, 9 March 2022

Summary Under
Tax Topics - Income Tax Act - Section 18.2 - Subsection 18.2(12)

Effective 30% capacity generated by interest and financing revenues (IFR) from NAL non-resident – even if paid by its Cdn. branch (p. 3)

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

Exclusion of excluded interest from interest and financing revenues/expenses (IFR/IFE) accommodates loss consolidations (p .4)

Excluded interest...

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Summary Under
Tax Topics - Income Tax Act - Section 18.2 - Subsection 18.2(1) - Adjusted Taxable Income - B - Paragraph (a)

Interest that is expressly permitted to be capitalized to resource pools is not added back (p. 4)

Variable B adds back a number of amounts so as...

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Summary Under
Tax Topics - Income Tax Act - Section 18.2 - Subsection 18.2(1) - Adjusted Taxable Income - C - Paragraph (b)

Circularity issue arising from the FTCs being affected by deductible interest and financing expenses (IFE), which cannot be determined until the...

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Summary Under
Tax Topics - Income Tax Act - Section 111 - Subsection 111(1) - Paragraph 111(1)(a.1)

Effect of carrying forward cumulative unused excess capacity for 3 years is similar to a 3-year carryback (p. 6)

IFE that is denied under new...

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

Effective transfer of excess capacity to or from group trusts (p.10)

Unlike the s. 18.2 rules, under which there is no ability for trusts within a...

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Summary Under
Tax Topics - Income Tax Act - Section 18.21 - Subsection 18.21(3)

No requirement to determine “excess capacity” (p. 9)

Unlike [under s. 18.2], there is no requirement to determine the “excess capacity”...

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