BUSINESS TRANSACTION TAX LAWYER
Vendor Transactional Preference - Share Sale
A corporate vendor will typically seek to sell the shares of the company, as opposed to the corporate assets. Through a share sale, the corporate vendor will realize a capital gain, one-half of which will be subject to tax. The gain realized on the sale of shares may be offset in full or in part by the applicable capital gains exemption available in respect of qualified small business corporation shares, thereby increasing the after-tax yield to the vendor. Conversely, an asset sale is less attractive to the corporate vendor as it imposes two levels of taxation, initially at the corporate stage and thereafter upon the corporate distribution to its shareholder(s).
Foreign Acquisitions via Canadian Resident Corporation
When a foreign business enterprise ("Purchaser") is looking to acquire shares of a Canadian resident corporation ("Target"), the Purchaser should consider utilizing a Canadian intermediary acquisition company ("CIAC") to facilitate the intended share acquisition with an aim of optimizing the realizable tax advantages. The intention is for the Purchaser to maximize the availability of the cross-border paid-up capital ("PUC"), such that the Purchaser can have the CIAC return profits to the Purchaser by way of PUC recovery, via a tax-free intercorporate dividend and without the implications of withholding taxes. However, with a multitude of variables, in particular as they pertain to the Target, there is considerable variances and strategies that come into play with such transactions.
Neufeld Legal P.C.
At Neufeld Legal P.C., we work with corporate businesses to optimize, strategize and implement both long-term and transactional tax planning; however, we do not undertake tax litigation or tax disputes. Our legal team works on proactive tax measures, as opposed to reactive tax matters where previously developed and implemented tax matters come under legal scrunity by the relevant tax authorities.
To learn how we can be of assistance, contact Neufeld Legal P.C. by telephone at 416-887-9702 (Toronto + Ontario) or 403-400-4092 (Calgary + Alberta); email at Tax@NeufeldLegal.com; or Skype at Christopher.Neufeld.
Taxes Covered - US Canada Tax Treaty
1. This Convention shall apply to taxes on income and on capital imposed on behalf of each Contracting State, irrespective of the manner in which they are levied.
2. Notwithstanding paragraph 1, the taxes existing on March 17, 1995 to which the Convention shall apply are:
(a) in the case of Canada, the taxes imposed by the Government of Canada under the Income Tax Act; and
(b) in the case of the United States, the Federal income taxes imposed by the Internal Revenue Code of 1986. However, the Convention shall apply to:
(i) the United States accumulated earnings tax and personal holding company tax, to the extent, and only to the extent, necessary to implement the provisions of paragraphs 5 and 8 of Article X (Dividends);
(ii) the United States excise taxes imposed with respect to private foundations, to the extent, and only to the extent, necessary to implement the provisions of paragraph 4 of Article XXI (Exempt Organizations);
(iii) the United States social security taxes, to the extent, and only to the extent, necessary to implement the provisions of paragraph 2 of Article XXIV (Elimination of Double Taxation) and paragraph 4 of Article XXIX (Miscellaneous Rules); and
(iv) the United States estate taxes imposed by the Internal Revenue Code of 1986, to the extent, and only to the extent, necessary to implement the provisions of paragraph 3(g) of Article XXVI (Mutual Agreement Procedure) and Article XXIXB (Taxes Imposed by Reason of Death).
3. The Convention shall apply also to:
(a) any taxes identical or substantially similar to those taxes to which the Convention applies under paragraph 2; and
(b) taxes on capital;
which are imposed after March 17, 1995 in addition to, or in place of, the taxes to which the Convention applies under paragraph 2.