Joint Committee, "Excessive Interest and Financing Expenses Limitation Proposals", 5 May 2022 Submission of the Joint Committee

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

Other countries use higher and flexible safe harbour limits (pp. 7-8)

  • The de minimis exception in para. (a) for a taxpayer which, together with...

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Summary Under
Tax Topics - Income Tax Act - Section 18.2 - Subsection 18.2(1) - Excluded Entity - Paragraph (c) - Subparagraph (c)(i)

“Substantially all” test must be satisfied for each business (p. 9)

  • All or substantially all of “each” business of the taxpayer and of...

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Summary Under
Tax Topics - Income Tax Act - Section 18.2 - Subsection 18.2(1) - Excluded Entity - Paragraph (c) - Subparagraph (c)(ii)

Exclusion for FAs even with nominal income (pp. 9-10)

  • The exclusion for any foreign affiliate could apply, for instance, to a dormant foreign...

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Summary Under
Tax Topics - Income Tax Act - Section 18.2 - Subsection 18.2(1) - Excluded Entity - Paragraph (c) - Subparagraph (c)(iii)

Reason for specified shareholder exclusion (p. 10)

  • It is understood that the policy concern being addressed arises where interest or financing...

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Summary Under
Tax Topics - Income Tax Act - Section 18.2 - Subsection 18.2(1) - Excluded Entity - Paragraph (c) - Subparagraph (c)(iv)

Exclusion for Canadian tax exempts, difficulties for publicly traded debt and level of aggregation (pp. 10-12)

  • Regarding the requirement that all...

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

Restriction to corps (pp. 14-16)

  • The excluded interest provision should be expanded to apply where either or both of the parties to a loan are...

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Summary Under
Tax Topics - Income Tax Act - Section 80 - Subsection 80(3)

S. 80 should be extended to RIFEs

  • Restricted interest and financing expenses should be treated similarly to non-capital losses so that, for...

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

Creation of non-capital loss in carryback or carryforward year (pp. 18-19)

  • An example is provided where a portion of a non-capital loss that is...

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

No addback of terminal losses (p. 21)

  • Variable B of the ATI formula should include an addback for any terminal loss deduction under s. 20(16)...

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

Need to properly flow through trust attributes to corporate or trust beneficiaries (pp. 24-26)

  • Para. (e) of variable C reduces ATI by an amount...

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