Section 18.2

Subsection 18.2(1)

Adjusted Taxable Income

A

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

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

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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B

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

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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Paragraph B(a)

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

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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C

Paragraph C(b)

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

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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Paragraph C(e)

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

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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Excluded Entity

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Paragraph (b)

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

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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Paragraph (c)

Subparagraph (c)(i)

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Subparagraph (c)(ii)

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Subparagraph (c)(iii)

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Subparagraph (c)(iv)

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Excluded Interest

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

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

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

Excluded interest...

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

General scope of excluded interest rules

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

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Interest and Financing Expenses

Subsection 18.2(2)

Articles

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

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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John Unger, "Proposed Section 18.2: Limitations on Deducting Costs to Finance Foreign Affiliates", International Tax, CCH, December 2007, No. 37.

Subsection 18.2(3)

Administrative Policy

2008 IFA Round Table, Q. 10.

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Subsection 18.2(4)

Subsection 18.2(12)