Glencore Tax Ruling Shows Need for Clear Intent in Merger Talks

A recent high court decision in Canada serves as a reminder for taxpayers to clearly document the intent of parties during merger talks to avoid unfavorable tax outcomes.

The Supreme Court of Canada’s recent decision not to reexamine a Federal Court of Appeal ruling in a dispute between Glencore plc and the Canada Revenue Agency leaves lawyers with a broad interpretation of what constitutes an inducement during merger talks, a factor in determining how merger fees are taxed, Eric Luu, founder of HKL Tax Law in Montreal, said.

The appeal court ruling classified fees as an inducement even if ...