The Investment Industry Association of Canada (IIAC) is calling on the U.S. Internal Revenue Service (IRS) and the U.S. Department of the Treasury to provide relief from the possible impact of U.S. tax rule changes on Canadian-based financial firms with subsidiaries in the United States, the industry trade group announced Monday.
Specifically, the IIAC is concerned that changes to the U.S. tax code, which are being adopted to prevent U.S. shareholders from engaging in transactions designed to evade taxes by shifting holdings offshore, could result in certain Canadian firms facing “onerous withholding and backup reporting requirements,” the IIAC says in a newsletter, and possibly impact how the firms structure international internal financing arrangements.
“IIAC members are concerned about the impact of the [changes] causing ‘downward attribution’ on multinational financial institutions that have legitimate corporate structures with subsidiaries both within the U.S. and in foreign jurisdictions, resulting in a foreign subsidiary of a foreign parent, artificially being considered a subsidiary of the U.S. subsidiary,” the IIAC says.
The trade group is asking the IRS and the U.S Treasury to avoid the “unintended consequences” that could follow by explicitly addressing these consequences in further guidance.