Tax Considerations

Income Taxes

Under the Income Tax Act (Canada) (the "Tax Act"), a U.S. entity is generally liable to pay taxes on any income earned in Canada, if that U.S. entity is "carrying on business in Canada". Similar to the Bank Act, the Tax Act does not include a definition for the phrase "carrying on business in Canada", and accordingly, the meaning of this phrase is derived from case law, as well as guidance from the Canada Revenue Agency (the "CRA"), which is Canada's tax regulator.

Based on the relevant authorities, a cross-border purchase and sale of receivables or asset-backed securities between a Canadian entity and a U.S. entity would generally not, in and of itself, constitute carrying on business in Canada that would trigger Canadian income tax liability for a U.S. entity. However, if a U.S. entity's business activities in Canada extend beyond a mere purchase and sale of receivables or asset-backed securities (e.g., servicing and collection of receivables),