Canada Tax Alert . 20 February 2014 : 2014 budget includes inbound financing and anti-treaty shopping measures . Canada’s 2014 federal budget, tabled in the House of Commons on 11 February 2014, contains two proposals that will have a significant impact on inbound investment into the country: (1) a proposed anti-treaty shopping rule, and (2) In the case of an ADI, there is no disallowance of debt deductions under the thin capitalisation provisions where, broadly, the ADI's ‘average equity capital’ does not exceed the ADI's ‘minimum capital amount’. The minimum capital amount is the lesser of the ‘safe harbour capital amount’, the ‘arm's length capital

The thin capitalisation rules act to limit the amount of debt deductions that an entity can otherwise deduct from their assessable income where the debt to equity ratios exceed the prescribed limits i.e. the entity is “thinly capitalised”.