{"id":2574,"date":"2023-09-13T10:55:02","date_gmt":"2023-09-13T17:55:02","guid":{"rendered":"https:\/\/www.thor.ca\/blog\/?p=2574"},"modified":"2023-09-13T10:55:02","modified_gmt":"2023-09-13T17:55:02","slug":"quick-update-new-eifel-regime","status":"publish","type":"post","link":"https:\/\/www.thor.ca\/blog\/2023\/09\/quick-update-new-eifel-regime\/","title":{"rendered":"Quick Update \u2013 New EIFEL Regime"},"content":{"rendered":"<p><strong>Context:<\/strong> As part of the avalanche of new draft legislation, the Department of Finance has released revised excessive interest and financing expenses limitation (EIFEL) rules.\u00a0 <a href=\"https:\/\/www.thor.ca\/blog\/wp-content\/uploads\/2023\/09\/EIFEL-Rules-September-7-2023-at-a-glance.pdf\">The attached Excel<\/a> is a high-level and technical summary of the new EIFEL regime.\u00a0 The changes released last month are highlighted in red in the technical summaries (at the numbered tabs).<\/p>\n<p><strong>Effective dates and elections:<\/strong> The new EIFEL rules are far-reaching, difficult to digest, and fast approaching.\u00a0 The rules will apply to many corporations for their taxation years beginning after October 1, 2023 (see Tab 2 \u2013 Excluded Entities), and several important elections will need to be considered:<\/p>\n<ul>\n<li>An election to exclude financing expenses between two Canadian group members, which allows a carve-out (but is not limited to) loss-consolidation transactions (see Tab 4 \u2013 Excluded Interest).<\/li>\n<\/ul>\n<ul>\n<li>An election to treat a loss as a \u201cspecified pre-regime loss\u201d, in which event a flat 25% of that loss is added back in the computation of the taxpayer\u2019s ATI (see Tab 7 \u2013 ATI).<\/li>\n<\/ul>\n<ul>\n<li>An election to transfer cumulative unused excess capacity between group members, which allows group members to effectively maximize their available deduction room in a year (see Tab 11 \u2013 Transferred Capacity).<\/li>\n<\/ul>\n<ul>\n<li>An election to forgo claiming a foreign accrual property loss (FAPL) in a controlled foreign affiliate (CFA), to avoid including that CFA&#8217;s financing expenses in the taxpayer\u2019s own financing expenses (see Tab 13 \u2013 CFAs).<\/li>\n<\/ul>\n<ul>\n<li>An election to use a consolidated &#8220;group ratio&#8221;, as opposed the 40% or 30% \u201cfixed ratio\u201d, in the formula that restricts the deduction of financing expenses (see Tab 19 \u2013 Group Ratio Rules). This allows certain corporate groups to potentially benefit from more deduction room where the group is highly leveraged.<\/li>\n<\/ul>\n<ul>\n<li>An election to apply a three-year carryforward of excess capacity determined for years before the introduction of the EIFEL regime (see Tab 20 \u2013 CIF &amp; Transitional Rules). This pre-regime excess capacity would be included in the applicable group members\u2019 cumulative unused excess capacity for the years in which the new rules apply.<\/li>\n<\/ul>\n<p><strong>The takeaway<\/strong>:\u00a0 If you thought interest deductibility issues can be a challenge under the existing rules \u2013 just wait.\u00a0 These new EIFEL rules are next level in their complexity.<\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong>Context:<\/strong> As part of the avalanche of new draft legislation, the Department of Finance has released revised excessive interest and financing expenses limitation (EIFEL) rules.\u00a0 <a href=\"https:\/\/www.thor.ca\/blog\/wp-content\/uploads\/2023\/09\/EIFEL-Rules-September-7-2023-at-a-glance.pdf\">The attached Excel<\/a> is a high-level and technical summary of the new EIFEL regime.\u00a0&hellip;<\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5,14,9,41,18,6,45,15,4,31,22,19],"tags":[],"class_list":["post-2574","post","type-post","status-publish","format-standard","hentry","category-canadian-controlled-private-corporation","category-corporate-reorganizations","category-corporate-tax","category-income-tax-act-ita","category-international-tax","category-private-company-reorganizations","category-substantive-canadian-controlled-private-corporation","category-tax-audits","category-tax-avoidance","category-tax-legislation-updates","category-trusts","category-withholding-tax"],"_links":{"self":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/2574","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/comments?post=2574"}],"version-history":[{"count":2,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/2574\/revisions"}],"predecessor-version":[{"id":2577,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/2574\/revisions\/2577"}],"wp:attachment":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/media?parent=2574"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/categories?post=2574"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/tags?post=2574"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}