New U.S. Tax Rules to Broadly Affect Cross-Border | KPMG | CA

New U.S. Tax Rules to Broadly Affect Cross-Border Financing

New U.S. Tax Rules to Broadly Affect Cross-Border

April 6, 2016, No. 2016-18. Many Canadian companies with U.S. operations will be affected by new U.S. tax regulations just issued. These regulations affect not only "inversions", as reported in the media, but also common financing transactions between Canadian and U.S. companies in the same corporate group. In particular, the regulations will affect whether debt instruments are considered debt or equity for U.S. tax purposes.


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The U.S. Treasury Department and the IRS released proposed regulations on April 4, 2016 concerning the tax treatment of certain U.S. corporations and U.S. partnerships with assets that are directly or indirectly acquired by a non-U.S. corporation and certain persons related to the U.S. corporations and U.S. partnerships (i.e., inversions).

In proposed regulations issued concurrently with the inversions guidance, the U.S. Treasury has introduced new U.S. thin capitalization rules significantly expanding the number of financing instruments which will be denied treatment as debt for U.S. tax purposes.

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Information is current to April 6, 2016. The information contained in this TaxNewsFlash-Canada is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.

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