Surveying the Scene: Canadian Mining Businesses & International Holding Companies

October 17, 2013

Surveying the Scene: Canadian Mining Businesses & International Holding Companies

Synopsis
3 Minute Read

If you’re planning on incorporating a foreign holding company into your business structure, there are several items to take into account.

Our national mining industry has quite the presence abroad; over 1,000 mining businesses based in Canada have assets in 100 countries, many through the use of international holding companies.

Why such a strong international showing? The benefits and applications of holding companies are multi-dimensional. In a mining context, international holding companies can attract investment partners, protect assets from expropriation and isolate riskier investments. With a properly set up holding company structure, organizations can also take profits generated from foreign operations in one country and transfer them with minimal tax implications to another country, without Canadian tax. Plus, holding companies can also function as a tax-effective way to finance business activities abroad by loaning out operating capital at a reduced foreign tax rate, without immediate Canadian tax implications.

Current Considerations

If you’re planning on incorporating a foreign holding company into your business structure, there are several items to take into account. For one, the jurisdiction you’re looking at needs to have a wide tax treaty network for a tax-efficient flow of capital. Canadian mining companies have typically gravitated toward Luxembourg and the Netherlands because of their stable tax environment and wide tax treaty networks. However, with both nations renegotiating or eliminating tax treaties with popular mining countries, the relevance of these regions is currently in flux.

Another key consideration in selecting where to set up your holding company is whether the country is considered a ‘tax haven’ by other countries where your organization has operations. In addition, you’ll want to take a closer look at the intricate conditions embedded into many tax treaties to ensure you’re not violating rules related to setting up holding companies primarily for the purposes of accessing tax advantages.

On The Horizon

With an increased level of uncertainty in traditionally favoured international tax arenas, it’s time to look at emerging favourable markets. For example, the international tax policies of Belgium, South Africa and the Barbados are changing in ways that align well with the key considerations I outlined above.

That being said, with a constantly fluctuating and increasingly complex international tax market, taking a casual approach to international holdings is no longer an option. With one of the most favourable outbound investment tax regimes in the world, Canadian mining operations should invest in proactive tax planning to improve global tax efficiency and enhance the capital, treasury and cash flow objectives of the business.

Insights

  • Progress

    February 03, 2023

    The role of organizational culture in change management

    Your workplace culture will ultimately make or break your efforts to transform your organization and effectively manage change.

  • Performance

    February 03, 2023

    What residential property owners need to know about Canada’s new anti-flipping rules

    The Federal Government has introduced a new anti-flipping tax measure that will impact individuals looking to sell their home or residential rental properties. This new law will apply to property sold on or after January 1, 2023.

  • Confidence

    February 01, 2023

    Non-profit organizations: how remote work impacts your financial processes and controls

    A clear and documented set of financial policies, with the accompanying procedures and internal controls, will help your non-profit organization operate confidently and efficiently in an era where remote work is increasingly the norm.