UPDATED With In-Depth Analysis: Back-To-Back Loan Proposals In 2014 Federal Budget Create Tax Problems

In an article recently published in Tax Notes International, Steve Suarez of BLG's tax group provides an in-depth analysis of the proposed back-to-back loan proposals in the 2014 federal budget. To read Steve's article, please click here.

Relevant to: Canadian entities with debt, if the creditor (or a creditor affiliate) has received an interest in property of a non-resident as security for that debt; and lenders to a Canadian debtor seeking security from foreign entities related to the debtor.

Issue: Starting in 2015, such debt may be treated as owing by the Canadian debtor directly to the non-resident whose property is securing the debt (not the creditor), resulting in interest on such debt potentially being subject to (1) non-resident interest withholding tax, and/or (2) restrictions on interest deductibility under Canada's "thin capitalization" rules.