Tax Inversions 101

Canada is considered one of the best places in the world to do business, partly due to our low corporate tax rate and favourable policies on repatriating foreign income earned in active businesses outside of Canada. These factors, in combination with our close proximity to the United States (and, now, our low Canadian dollar), has many US companies looking north—for growth opportunities in general and, in some cases, specifically to relocate their head office to take advantage of a tax inversion.

In a nutshell, a tax inversion occurs when a US company merges with a similarly-sized foreign company and then locates the new parent company in the same foreign jurisdiction as its merger partner (or, sometimes, a third country). The tax goal is to ensure the new parent is located in a jurisdiction with a lower tax rate.