The new excess interest and financing expense rules (“EIFEL” for short) are set out in draft legislation released by Finance on February 4, 2022. The EIFEL rules do not apply to an “excluded entity”, which includes:
(1) Canadian-controlled private corporations (“CCPCs”) that, with any associated corporations, have less than $15 million of taxable capital employed in Canada;
(2) groups of corporations and trusts whose aggregate net interest expense among the Canadian entities is $250,000 or less; and
(3) groups of corporations and trusts that are exclusively Canadian residents that carry on substantially all of their business in Canada. For this exclusion to apply, no non-resident may be a foreign affiliate of a member or hold a specified interest in a member of the group, and no group member can have a significant amount of interest and financing expenses payable to a tax-indifferent investor.
Cameron Mancell “A Summary of the Excess Interest and Financing Expense Limitation Rules—Part I” 2635 Tax Topics (September 6, 2022)
