Topic: Tax

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Avoiding tax traps: don’t forget about non-competition agreements

Non-competition agreements can be a valuable tool for purchasers who want to protect their investments in new businesses. However, non-competition agreements can have unintended and unexpected tax consequences, particularly to sellers who grant non-competition agreements to purchasers. The Income Tax Act (Canada) (the Act) contains specific provisions regarding the taxation of “restrictive covenants”, a broadly … Continue reading

Price adjustment clauses in contractual agreements

This article highlights the importance of price adjustment clauses in contractual agreements from a tax perspective. A price adjustment clause is often used in transactions if property is transferred between non-arm’s length taxpayers and the intention of the parties is for the transaction to occur at fair market value (FMV). If the transaction is later … Continue reading

Taxation of dividends

One of the most commonly used methods of returning investments to shareholders is the declaration of dividends. In this article, we summarize the tax treatment of some different types of dividend income for Canadian resident investors. Canadian corporations can declare both eligible or ordinary cash dividends. The distinction reflects the difference in tax treatments on … Continue reading

Limiting tax exposure on an acquisition by share purchase

One characteristic consequence of a share sale is, generally, that the vendor realizes a capital gain. Canadian resident shareholders are generally taxed on half of the amount of the capital gain. If available, the cumulative lifetime capital gains exemption can shelter all or a portion of the capital gain, reducing the overall tax bill of … Continue reading

Tax considerations in M&A for purchasers dealing with non-resident vendors

If a non-resident vendor sells property, one consideration that a purchaser must be cognizant of is whether that property constitutes “taxable Canadian property” under the Income Tax Act (Canada). If the property is taxable Canadian property and the vendor does not obtain a certificate of compliance (discussed below), generally the purchaser must withhold 25% of … Continue reading

Asset deal versus share deal: what’s right for you?

Generally, there are two basic structures that can be used in the purchase and sale of a business: acquisition of the assets of the business from the operating corporation (an Asset Deal); or acquisition of the shares of the operating corporation from the corporation’s shareholders (a Share Deal). In some cases, commercial considerations will be determinative of … Continue reading

The return of the REIT

M&A activity involving real estate investment trusts (REITs) is heating up in Canada and south of the border, according to a recent PWC report, “Emerging Trends in Real Estate: Global Outlook for 2015”. Following a succession of REIT conversions in 2014 by companies with significant real estate holdings, coupled with ripe market conditions for REITs, … Continue reading

Treaty shopping and BEPS considerations in the M&A context

Every acquisition requires careful tax planning early on in the process, especially when dealing with cross border acquisitions. One important consideration when a foreign company plans to acquire a Canadian company is the impact of any tax treaties that currently exist between the two jurisdictions. Tax treaties effectively reduce tax that would be otherwise payable … Continue reading

Tax implications of acquisitions of control

Acquiring control of another company has several tax consequences, many of which are potentially adverse for the acquiring party. It is important to consider them early on in the acquisition process. Generally, an acquisition of control occurs when a person or entity acquires sufficient shares of a company so that they have the right to … Continue reading

Webinar – M&A in 2014: optimizing after-tax returns in acquisitive transactions

Given that after-tax returns are critical in pricing most transactions, there is a premium on tax planning at the outset of negotiations. The goal should be to ensure tax-efficient structures in which neither the buyer nor seller learns after the fact that their targeted after-tax return was missed. On September 4, 2014, William Paul Bowers, Partner, Fulbright … Continue reading

Havenly acquisitions: tax inversions may contribute to M&A activity

2014 is increasingly looking like a celebratory year in Canadian M&A. Despite a mild downturn in Canadian M&A deal flow in 2013, a steady increase in high-profile transactions in 2014 suggests that M&A activity continues to gain momentum, particularly in the retail and consumer product industries. The Canadian M&A market experienced a very strong second … Continue reading

Webinar – Norton Rose Fulbright’s M&A in 2014: tax considerations that optimize after-tax returns in acquisitive transactions

Join us on Thursday, September 4, 2014 for a webinar on tax considerations that optimize after-tax returns in acquisitive transactions. Register now Given that after-tax returns are critical in pricing most transactions, there is a premium on tax planning at the outset of negotiations. The goal should be to ensure tax-efficient structures in which neither the … Continue reading

Seminar: Norton Rose Fulbright’s 7th Annual Mergers & Acquisitions School

On Wednesday, September 10, 2014 to Wednesday, October 22, 2014 from 6:30 pm – 8:30 pm (US/Central), Norton Rose Fulbright  will be presenting its 7th Annual Mergers & Acquisitions School for corporate, in-house legal, investment banking and private equity professionals in Houston, Texas. This comprehensive program is designed for participants that desire to develop a … Continue reading

New reporting obligation for transactions affecting tax basis of securities

This post was contributed by Jessica Lyn, Lawyer, Norton Rose Canada As a result of new US reporting rules that came into effect on January 1, 2011, Canadian public and private issuers may be subject to a significant information reporting obligation when undertaking one of a wide range of transactions. The new rules are intended to … Continue reading