Budget 2018: Cross Border Tax Planning Measures Targeted

Budget 2018 introduced several international tax measures designed to address certain transactions through which taxpayers are potentially able to either strip surplus out of Canada free of tax or earn passive property income offshore while deferring or, in some cases, avoid altogether, Canadian taxation. 

Cross-Border Surplus Stripping using Partnerships and Trusts

Paid-up capital in respect of shares ("PUC") is a valuable tax attribute, particularly for non-residents with Canadian subsidiaries.  Unlike dividends, PUC can be returned by a Canadian corporation to its foreign shareholders free of Canadian withholding tax at any time and generally without regard to the level of the corporation's earnings.  PUC is also one of the components in the computation of the "equity amount" in respect of a corporation for purposes of the Canadian thin capitalization rules. Generally, interest that is paid or payable by a Canadian corporation on debt owing to certain non-arm's