{"id":513,"date":"2013-03-11T15:28:42","date_gmt":"2013-03-11T15:28:42","guid":{"rendered":"https:\/\/thor.ca\/\/blog\/?p=513"},"modified":"2025-02-12T13:29:33","modified_gmt":"2025-02-12T21:29:33","slug":"cra-confirms-view-on-contributed-surplus-in-thin-cap-calculation","status":"publish","type":"post","link":"https:\/\/www.thor.ca\/blog\/2013\/03\/cra-confirms-view-on-contributed-surplus-in-thin-cap-calculation\/","title":{"rendered":"CRA confirms view on contributed surplus in thin cap calculation"},"content":{"rendered":"<p>In <a href=\"http:\/\/thor.ca\/blog\/wp-content\/uploads\/2013\/03\/2012-0445891E5.pdf\">2012-0445891E5<\/a>, the CRA confirmed its view that contributed surplus in Canada\u2019s thin capitalization formula is the amount that is, or would be, recognized as contributed surplus under Canadian GAAP.  The thin capitalization formula generally places a limit on the amount a Canadian corporation (Canco) may deduct as interest expense on in-bound financing from a non-resident group member, and is determined with reference to Canco\u2019s permitted debt-to-equity ratio (s. 18(4)).  The current debt-to-equity ratio is 1.5 to 1.  Three components make up Canco\u2019s \u201cequity\u201d for this purpose: specified paid-up capital, retained earnings, and \u201ccontributed surplus\u201d.  The CRA was asked to confirm how contributed surplus would be computed in the context of a particular reorganization.  The CRA first confirmed its long-standing view that contributed surplus of Canco had to be determined under generally-accepted accounting principles (GAAP).  The CRA then confirmed that an amount reflected in Canco\u2019s \u201cequity reserves\u201d under international financial reporting standards (IFRS) may also constitute contributed surplus, but only where the amount \u201cwould be\u201d so categorized if Canco\u2019s financial statements had been prepared in accordance with Canadian GAAP (i.e., under Part II of the CICA Handbook).<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In <a href=\"http:\/\/thor.ca\/blog\/wp-content\/uploads\/2013\/03\/2012-0445891E5.pdf\">2012-0445891E5<\/a>, the CRA confirmed its view that contributed surplus in Canada\u2019s thin capitalization formula is the amount that is, or would be, recognized as contributed surplus under Canadian GAAP.  The thin capitalization formula generally places a limit on&hellip;<\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-513","post","type-post","status-publish","format-standard","hentry","category-corporate-tax"],"_links":{"self":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/513","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=513"}],"version-history":[{"count":1,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/513\/revisions"}],"predecessor-version":[{"id":2798,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/513\/revisions\/2798"}],"wp:attachment":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/media?parent=513"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/categories?post=513"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/tags?post=513"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}