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U.S. — New interest expense limitation regs and guidance

U.S. — Interest expense limitation regs and guidance

Canadian companies may be affected by changes to the U.S. rules on interest expenses.

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Canadian companies that do business in the United States should determine how they will be affected by changes to the U.S. rules on interest expenses. The IRS issued final and new proposed regulations, as well as other related administrative guidance and frequently asked questions, for the expanded application of the interest expense limitations under section 163(j) of the Internal Revenue Code (the Code) on July 28, 2020. The final regulations provide clarity on several issues, including calculating the interest expense limitation and what qualifies as interest for purposes of the limitation.

These regulations, which are sometimes referred to as "earnings stripping rules", may deny a deduction for certain interest expenses paid to both related and unrelated lenders. Previously, these rules only applied to interest paid to foreign related parties. This edition of TaxNewsFlash-Canada provides a high level review of the final regulations, effective dates and important changes that may affect Canadian multinational companies.

Download this edition of the TaxNewsFlash to learn more.

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