U.S. Tax Reform May Limit Interest Expense Deduction | KPMG | CA
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U.S. Tax Reform May Limit Interest Expense Deduction

U.S. Tax Reform May Limit Interest Expense Deduction

Canadian multinationals may be affected by new U.S. tax reform.


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These proposals, if enacted, could severely reduce the amount of deductible interest expense of all U.S. companies. A subset of the proposals specifically targets multinationals and, as such, may restrict interest deductions of leveraged U.S. subsidiaries of Canadian multinationals. Although these significant proposals included in the tax reform bill may still be amended as they proceed through the U.S. legislative process, Canadian multinationals may want to carefully review the existing leverage of all of their U.S. companies, including cross-border financing structures, to determine how their business may be affected.

For multinationals, of particular interest are the proposals that include two approaches that generally work to:

  • Limit the deductible net "business interest" expense of all U.S. businesses (regardless of form)
  • Limit the deductible net interest expense of U.S. corporations that are members of an international financial reporting group.

Multinationals would be subject to the approach that produces the lowest net interest expense deduction.

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