Canada: International tax legislative proposals concerning back-to-back loans, “debt parking”

Canada: Tax proposals including back-to-back loans

Canada’s Department of Finance released draft legislative proposals to implement certain outstanding measures that were originally announced in the 2016 federal budget, including certain international tax changes relating to:

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  • Extension of the back-to-back rules: The draft legislation includes new rules on the back-to-back rules that were not detailed in the 2016 federal budget. The rules extend the back-to-back loan rules to certain back-to-back loan arrangements, character substitutions, and rents, royalties and other similar payments.
  • Debt parking to avoid foreign exchange gains: The draft legislation introduces debt parking rules that were not detailed in the 2016 federal budget. The rules are intended to counter the "parking" of a debt obligation denominated in a foreign currency that is undertaken to avoid the realization of a foreign exchange gain on the repayment of the debt obligation.
  • Cross-border surplus stripping: The draft legislation also includes legislation that is substantially the same as the 2016 federal budget on cross-border surplus stripping (section 212.1).


Read an August 2016 report prepared by the KPMG member firm in Canada

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