Topics to Discuss

1. Federal Budget Changes

  • Limits on Interest Deductibility

2. International Tax Initiatives

  • Global Minimum Tax Rate of 15%

Federal Budget Tax Changes

Interest Deductibility Limits

  • Starting in 2023 a corporation that is affiliated with a non‐resident will be able to deduct only 40% of "tax EBITDA"
  • Namely, 40% of taxable income before taking into account interest expense, interest income and income tax, and deductions for depreciation and amortization
  • After 2023, the limit is reduced to 30%
  • Two important exclusions:
    • CCPC's and their associated corporations having taxable capital of less than $15 million, and
    • Groups of corporations and trusts whose aggregate net interest expense is $250,000 or less

International Tax Initiatives

Global Minimum Tax of 15%

  • OECD/G20 Framework on base erosion and profit shifting ("BEPS" project)
  • Starting in 2023, a Multinational Corporation with annual sales of at least €750 million will be required to pay a minimum tax of 15% determined on a county‐by‐country basis
  • There will be a formulaic substance carve‐out that will exclude an amount of income that is at least 5% (in the transition period of five years, at least 7.5%) of the carrying value of tangible assets and payroll in a jurisdiction, and a de minimis exclusion

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.