James F. McDonough
Of Counsel
732-568-8360 jmcdonough@sh-law.comKey Contacts
Back
Amid all of the recent news coverage of American multinational corporations inverting to redomicile in distant foreign countries, a massive deal is going down just next door. Burger King announced this morning that it reached a deal with Canadian fast food restaurant Tim Hortons, which primarily serves breakfast fare. If the proposed merger were to go through, the resultant company would be the world’s third-largest fast food restaurant chain, with a total of more than 18,000 outlets and roughly $22 billion in system sales.
At least part of this fervor likely comes from the plans to create a new, publicly traded company headquartered in Ontario Canada. Why Canada?
There are a number of benefits for Burger King in seeing this inversion through. First of all, Canada’s top corporate tax rate in Ontario is 26.5 percent, according to Forbes. This includes both the top federal rate of 15 percent and the provincial corporate tax rate of 11.5 percent, making for a significantly lower rate than the federal rate of 35 percent experienced by Burger King currently.
The hidden gem may be the Canadian treatment of a foreign affiliate’s “exempt surplus.” Dividends paid from exempt surplus are generally exempt from Canadian tax by virtue of a 100% dividends received deduction. Canada uses a combined exemption and credit system applies to dividends received from a foreign affiliate, including a Controlled Foreign Affiliate. Imagine all of the profits held offshore by US companies, such as Apple, Microsoft and Google escaping tax upon repatriation to the parent. Small wonder why Canada was chosen.
Burger King also operates in about 100 countries. This means that its earnings in foreign countries would be protected from the U.S. tax rate, as the U.S. is one of the only developed countries in the world to tax global income for corporations and individuals.
It is still too soon to tell what the long term effects of the Canadian government’s move will be.
Corporate tax inversion is an extremely hot topic right now in the United States, so much so, it has even spread into Canada. Frank Brunetti and I have been keeping up with this topic since the beginning. You can get involved and follow the story from some of our previous posts:
- Practices: Tax and Trusts & Estates, International Law & Trade
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public
Cryptocurrency intimidates most people. The reason is straightforward. People fear what they do not understand. When confusion sets in, the common reaction is either to ignore the subject entirely or to mistrust it. For years, that is exactly how most of the public and even many in law enforcement treated cryptocurrency. However, such apprehension changed […]
Author: Bryce S. Robins
Understanding Chattel Paper: A Key Component in Secured Transactions
Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]
Author: Dan Brecher
Crypto Compliance: A Comprehensive Guide
For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]
Author: Bryce S. Robins
Supreme Court and Title VII: Implications for Reverse Discrimination
Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]
Author: Matthew F. Mimnaugh
SPACs Are Back, What You Need to Know
Special purpose acquisition companies (better known as SPACs) appear to be making a comeback. SPAC offerings for 2025 have already nearly surpassed last year’s totals, with additional transactions in the pipeline. SPACs last experienced a boom between 2020–2021, with approximately 600 U.S. companies raising a record $163 billion in 2021. Notable companies that went public […]
Author: Dan Brecher
Short Form Merger: Streamlining the Process for Businesses
Merging two companies is a complex legal and business transaction. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process that involves important corporate governance considerations. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process. However, […]
Author: Dan Brecher
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.