An overview by Borden Ladner Gervais, Taxand Canada
The Supreme Court of Canada (SCC) refused CAE Inc. leave to appeal its loss before the Federal Court of Appeal (FCA) in a case involving the tax treatment of low-interest loans CAE had received from Industry Canada, a federal government department, on 25 May 2023.
This dismissal raises concerns regarding the tax treatment of low-interest loans from Industry Canada. The case reveals that not only the favourable interest rate, but the entire loan principal, can be subjected to adverse tax rules, thereby posing significant risks for taxpayers benefiting from government incentives.
Furthermore, this case extends its impact beyond the scientific research and experimental development (SR&ED) sector, influencing taxpayers who receive diverse forms of government assistance. To prevent costly disputes and uncertainties in the business community, government action to clarify when taxpayers should expect to have these adverse tax rules applied to them is urgently needed.
Steve Suarez, Partner at our Canadian firm Borden Ladner Gervais, delves into these concerns in greater detail.
Read the full overview here.
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