​These proposals, known as the excessive interest and financing expenses limitation (EIFEL) rules are broader than is often assumed. In addition to large multinationals, these rules also apply to trusts and small- and medium-sized corporations, with narrow exceptions. For example, the EIFEL rules could apply in common situations that include corporations and trusts with foreign affiliates, non-resident shareholders or beneficiaries, business carried on outside Canada, or interest paid to tax-indifferent investors.

To prepare for these changes, corporations and trusts should review the EIFEL rules to determine whether they may be affected and model potential impacts, including on after-tax cashflows. Note that these rules, which are proposed to apply to taxation years beginning in 2023, have so far only been released as draft legislation, and a revised version of the rules that could include additional changes is soon expected to be issued for public consultation.

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