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ARTICLE · 30 AUGUST 2012

August 14 Draft Legislation Targets Foreign-Owned Canadian Companies

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The Canadian federal budget of March 29, 2012 ("2012 Budget") contained a variety of provisions directed at Canadian subsidiaries of foreign companies (see here for prior commentary).

CanadaTax
Steve Suarez
Steve Suarez
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The Canadian federal budget of March 29, 2012 ("2012 Budget") contained a variety of provisions directed at Canadian subsidiaries of foreign companies (see here for prior commentary). On August 14, 2012, the Department of Finance released draft legislation that would enact many of these proposals and which contain some variations from the initial announcements in the 2012 Budget. This bulletin identifies who is affected by these proposals and how (summarized in the table below).

SUMMARY OF AUGUST 14 FOREIGN MULTINATIONAL DRAFT LEGISLATION

"Foreign Affiliate Dumping" Rules

For some years the Department of Finance has been concerned with certain transactions that, in their simplest form, involve a foreign-controlled Canadian subsidiary purchasing shares of a foreign member of the group and deducting interest accruing from the balance-of-sale purchase price against its income for Canadian tax purposes (see Figure 1). Such "dumping" of the foreign affiliate

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