Session1
Fundamentals & Hot Topics
Angelo Nikolakakis, Partner, Couzin Taylor LLP / Ernst & Young L.P.
9:00-10:00
Understanding the Basic Building Blocks of the Canadian Foreign Affiliate Rules
Michael Friedman, Partner, McMillan LLP
Canadian taxpayers that hold equity interests in foreign corporations are frequently entitled to claim preferential Canadian tax treatment in respect of dividends received from such corporations. Conversely, Canadian taxpayers may also be subject to Canadian income tax on an accrual basis in respect of certain forms of passive income earned by controlled foreign affiliates. This session will explore many of the foundational concepts that underpin the Canadian foreign affiliate regime.
General overview of the Canadian foreign affiliate regime
What is a "foreign affiliate"?
What is a "controlled foreign affiliate"?
How do you compute a taxpayer's "equity percentage" in a particular corporation?
Section 113 deductions in respect of dividends received from foreign affiliates
10:15-11:00
Impact of Tax Treaties
John G. Lorito, Partner, Stikeman Elliott LLP
Given the rapid growth in international trade and commerce, the Canadian tax practitioner must keep up with the changes affecting Canada’s network of international tax treaties. This discussion will look at the most recent and interesting tax treaty issues in the context of foreign affiliates.
Tax treaties
Tax information exchange agreements
Determining the "treaty residence" of a foreign affiliate
Non-qualifying country and income from non-qualifying business
Electronic commerce and intangibles
10:30-11:00 NETWORKING BREAK
11:30-12:30
Intensive Extended Session: Making Sense of the FAPI Rules
Ryan Michalski, Senior Manager International Tax, Ernst & Young LLP
Abigail Kan, Director, Tax, McGovern Hurley Cunningham LLP
Salvador Borraccia, Partner, Baker & McKenzie
The "foreign accrual property income" (FAPI) rules are complex, with legislative amendments and evolving case law adding to the confusion. Changes to the law have also offered some additional tax-planning opportunities to those with a clear understanding of the regime. This discussion will review a number of the issues associated with the FAPI rules as well as certain opportunities that they provide.
Income from property: general; investment business; 95(2)(l); income from an adventure in the nature of trade; incidental income
Income from a business other than an active business: 95(2)(a.1); 95(2)(a.2); 95(2)(a.3) & (a.4); 95(2)(b)
Income from a non-qualifying business
Capital gains: excluded property; foreign exchange
Exclusions: 95(2)(a); 95(2)(f.1)
Deductions: foreign accrual tax; 91(5) & 92
Session2
Planning Issues
Angelo Nikolakakis, Partner, Couzin Taylor LLP / Ernst & Young L.P.
1:30-3:00
Intensive Extended Session: Financing of Foreign Affiliates
Angelo Nikolakakis, Partner, Couzin Taylor LLP / Ernst & Young L.P.
This interactive discussion will take a detailed and critical look at the latest developments surrounding tax-effective financing opportunities with respect to foreign affiliates, exploring the opportunities and pitfalls associated with these arrangements.
Tax considerations when financing active business operations
Recent technical changes and CRA pronouncements
Key sections: 95(2)(a), 17, and proposed 90(4) “upstream loan” rules
3:15-4:15
IP Considerations for Foreign Affiliates
Lou Milrad, Principal, Milrad Law Office
What are the benefits of holding IP and/or conducting research and development through foreign affiliates? Should you transfer your technology to a foreign affiliate? This presentation will examine these questions and associated considerations.
Choosing a jurisdiction for IP ownership
Strategies to minimize taxes on exporting IP
Use of cost sharing and other arrangements
Effective planning using inter-affiliate licensing and similar arrangements
Strategies to repatriate IP back to Canada
3:00-3:30 NETWORKING BREAK
4:15-5:00
Foreign Exchange Implications & Planning
Robert Raizenne, Partner, Osler, Hoskin & Harcourt LLP
Companies with multinational operations need to develop long-term strategies to help minimize the impact of foreign exchange volatility. This discussion will look at various foreign exchange planning strategies in the foreign affiliate context.
General treatment of foreign exchange gains and losses of foreign affiliates
Specific arrangements and associated treatment and pitfalls
Direct debt and direct equity financing
Inter-affiliate financing
General principles for computing FX implications
Hedging transactions
Session3
Acquisitions & Reorganizations
Angelo Nikolakakis, Partner, Couzin Taylor LLP / Ernst & Young L.P.
9:00-10:30
Intensive Extended Session: Foreign Affiliate Acquisitions
Carrie Smit, Partner, Goodmans LLP
This presentation will cover the foreign affiliate tax consequences arising on an acquisition of a foreign affiliate, with particular emphasis on the tax consequences arising on the acquisition of control of a Canadian parent corporation.
Foreign holding corporations
FAPI analysis and residency considerations
Acquisition of Canadian parent corporation
Paragraph 88(1)(d) bump issues
Paragraph 95(2)(f.1)
11:00-12:00
Intensive Extended Session: Reorganization of Foreign Affiliates
Angelo Nikolakakis, Partner, Couzin Taylor LLP / Ernst & Young L.P.
A key element of foreign affiliate planning is ensuring that they are structured in such a way as to minimize global tax costs, whether at the earnings stage, the disposition stage, or at the repatriation stage. This discussion will focus on the various techniques to reorganize foreign affiliate structures.
Foreign affiliate liquidations and other distributions
Foreign affiliate mergers
Asset transfers between foreign affiliates
10:30-11:00 NETWORKING BREAK
12:00-12:30
Proposed Foreign Affiliate Dumping Rules
David P. Stevens, Partner, Gowling Lafleur Henderson LLP
In August 2012, the Department of Finance released draft legislation that included revised foreign affiliate dumping proposals that were originally introduced in the 2012 federal budget. These new rules, intended to discourage foreign-based multinationals from dumping foreign affiliates into their Canadian subsidiaries, could have major tax impacts for foreign controlled Canadian corporation making an investment in its foreign subsidiary. This session will discuss these proposals, their implications for Canadian corporations and steps to take to minimize their negative impact, including:
Overview of new FA dumping rules: situations where they apply
Tax consequences of new proposals: deemed dividends, reduction of paid up capital
Exceptions to the application of a deemed dividend or PUC reduction
FA investments subject to the FA dumping rules
Current status and timing of the proposals
How to mitigate or avoid the application of the new rules
12:30-1:30 Lunch
Session4
Effective Strategies
Angelo Nikolakakis, Partner, Couzin Taylor LLP / Ernst & Young L.P.
1:30-2:30
Intensive Extended Session: Planning For the Sale of Foreign Affiliates
Penny Woolford, Partner, KPMG LLP
This presentation will address the Canadian tax issues to be considered by a taxpayer in selling shares of a foreign affiliate. The focus will be on identifying and achieving the principal tax objectives of the sale.
Overall tax minimization on gains
Effective utilization of any losses
Tax-efficient redeployment/repatriation of the proceeds from the sale
Update on recent technical developments
2:45-3:30
Repatriating Profits and Capital
Sandra Slaats, Tax Partner, Deloitte LLP
This presentation will take a close look at tax-effective strategies for repatriating profits and capital of foreign affiliates, including specific strategies involving the tax-efficient flow of dividends from foreign affiliates.
Repatriation of capital to Canada
Dividends from exempt surplus, taxable surplus and hybrid surplus
Alternative strategies to return funds to Canada, including the impact of the new upstream loan rules
3:00-3:30 NETWORKING BREAK
3:30-4:15
Structuring Foreign Affiliates
Ron Nobrega, Partner, Fasken Martineau DuMoulin LLP
This discussion will provide an overview of alternatives for structuring foreign affiliates to minimize taxes payable on a global basis by Canadian-based multinationals. Some specific strategies will also be considered, including:
Holding structures for operating subsidiaries
Financing and insurance arrangements
Active business income strategies
Optimizing benefits available under Canada's tax treaties
4:15-5:00
Dispute Resolution for Foreign Affiliate Transactions
Barry Leon, Partner, Perley-Robertson Hill & McDougall LLP
Transactions involving foreign affiliates have the potential to give rise to disputes – this means that parties and their legal counsel need to pay attention to their contractual provisions for resolving disputes. Yet often little thought is given to this important aspect of risk management in these arrangements. The agreements in these transactions should set out how disputes between parties are to be resolved, having regard to the nature of the business, the kinds of disputes most likely to arise, and the importance of things such as confidentiality, speed, and cost. This session will examine these matters and the factors to consider in negotiating dispute resolution provisions and in particular the effective use of international arbitration to resolve the dispute and obtain an enforceable arbitral award.
Reducing risk in international transactions using international commercial arbitration and investment protection treaties
Pros and cons of ‘step clauses’ providing for negotiation and mediation before arbitration
Key factors for effective arbitration agreements
Avoiding pitfalls when negotiating and drafting arbitration provisions
Special considerations for multi-contract and multi-party transactions
Choice of governing law
