Not Comfortably in Debt Further to the February 1998 federal budget, interest income may be imputed to Canadian-resident corporations on indirect loans that remain outstanding for one year or more.
Inappropriate results continue to surface.
Assume that USco owns 100 percent of Canco. Canco is taxed on imputed interest on the USco-US 2 loan if it remains outstanding for more than a year. The indirect loan provisions continue to apply in situations totally outside the policy intent of the original budget proposal. Until Finance revisits and revamps the provisions, all structures involving intercorporate debt between non-residents should be carefully tested. Finance announced that the consultation period is extended to year-end and implementation deferred to taxation years beginning after 2001.