摘要：The “exempt surplus” and “underlying foreign tax” of a foreign affiliate are valuable tax attributes for a corporate taxpayer, because they allow the repatriation of foreign earnings free of Canadian tax. As a result, taxpayers over the years have devised various strategies to optimize the use of these balances. The Department of Finance has been concerned with the “inappropriate” preservation of exempt surplus for the better part of the last 10 years, and in 2002 and 2004, complex technical amendments were introduced to deal with these concerns. The proposals contained in the draft legislation released on December 18, 2009 and reissued in a slightly modified version on August 27, 2010 represent Finance’s latest attempt to devise a solution that balances its objective of curtailing the “duplication” of exempt surplus on foreign affiliate reorganization transactions with taxpayers’ need for rules that can be effectively applied in practice and do not result in undue complexity or impair the ability to effectively structure the foreign affiliate group.
In this article, the authors address two main aspects of these proposals: the “fill-the-hole” rule, which is designed to prevent the “circumvention” of blocking exempt deficits in a foreign affiliate chain; and the acquisition-of-control rules, which are designed to limit the ability to both claim a tax basis “bump” on the shares of a foreign affiliate and at the same time enjoy the benefits of surplus accrued prior to the acquisition of the Canadian target. The approach taken in these proposals is compared with and contrasted to the previous proposals contained in the February 27, 2004 technical amendments, and the proposals are evaluated in terms of their practical impact on taxpayers. This article thus attempts to provide a roadmap for these complex changes, to explain their impact on the surplus of foreign affiliates, and to contribute to a better understanding of the evolution of these rules.
关键词：FOREIGN AFFILIATES n AMENDMENTS n SURPLUS n DEFICITS n REORGANIZATION n ELECTIONS
