An analysis by Borden Ladner Gervais, Taxand Canada
In the Fall Economic Statement, the Canadian government addressed tax issues stemming from low or no-interest loans. A pivotal Supreme Court decision in May 2023 classified such loans as “government assistance,” spotlighting the rules in the Income Tax Act (Canada).
This decision conflicted with government initiatives supporting the clean economy, creating a dilemma for projects torn between Investment Tax Credits (ITCs) and favourable financing from the Canada Infrastructure Bank (CIB).
In response to industry concerns, the government committed to amending the Income Tax Act. The amendment specifies that concessional loans with reasonable repayment terms from public authorities generally won’t be deemed government assistance. This proactive step is crucial for sectors like energy, mining, and scientific research, instilling confidence in the feasibility of clean economy projects and aligning with broader sustainability goals.
Steve Suarez, Partner at our Canadian firm, Borden Ladner Gervais, provides an in-depth analysis of this development. Continue reading here.
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