Cash Repatriation

Commentary

Many people in the US consider Canada to be their 51st state. It often comes as a surprise to MNCs which operate there that this is not the case: in fact, Canada can present surprising challenges for businesses. Not only are there two official languages – and French is often mandatory for dealing with the government in Quebec - but laws and regulations can vary significantly across the thirteen provinces and territories. And, of course, the US is not all plain sailing for non-US MNCs, but that is a different discussion……

In this call, peers focused on two areas where they found Canada to be challenging:

• Cheques: Canadian businesses are even more addicted to this payment instrument than their neighbours to the south – and the cutoff times are not always helpful. Most peers have established lockboxes: all the banks offer this service, but some peers still physically carry the cheques they receive to their banks.
• Cross border cash pooling: this presents potential issues, as Revenue Canada can reclassify cross border payments as deemed dividends, in the absence of convincing proof to the contrary. The standard withholding tax on dividends is 25%, though tax treaties with most developed nations reduce this to 5% or 15%. It can be material.

From a banking point of view, most peers are able to use their global relationship banks to satisfy their needs: HSBC exited in 2024; Citi, JPMorgan and Bank of America were mentioned, but are not necessarily present everywhere. Foreign ownership of Canadian banks was restricted until 1989, and Canadian banking regulations are still quite stringent.

The discussion about the deemed dividend rule was lively and not conclusive. Most banks are happy to provide cross border cash pooling, but, as always, they are not prepared to offer tax advice – they are particularly reluctant to do so here. This has led several peers to either suspend their cross border pools, not implement them, or use workarounds. CompleXCountries does not provide tax advice, either: the following is a summary of the discussion, supplemented by Google searches. Any MNC implementing or managing a cross border pool should seek direct professional tax advice.

• In the absence of solid evidence to the contrary, Revenue Canada can consider a payment to an affiliate outside the country to be a deemed dividend, and levy the applicable rate of withholding tax (WHT). For most peers, tax treaties would reduce this to 5% or 15%, depending on the country and ownership percentage.
• This rule is not unusual.......... Please Register / Log In to read the rest of this commentary

   

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The Balkans is a difficult environment for corporate treasurers. Regulatory complexity, FX controls, multiple languages and scripts and limited presence of international banks mean that work arounds are often required. For example, SEPA (the Single European Payments Area): requires international transfer fees within the area to be aligned with local ones -  Most countries now price cross border transfers as local ones; Greece does the opposite. As a result, internal transfers in Greece are prohibitively expensive.

Our detailed report covers Treasurers’ experiences and approaches to Greece, Bulgaria, Croatia, Slovenia, Romania, Serbia, Kosovo, Bosnia and Herzegovina and  North Macedonia.

Banks discussed in the report include: Citi,Raiffeisen Bank, UniCredit, BNP Paribas, Société Générale, Alpha Bank, National Bank of Greece, Piraeus Bank, Eurobank, Zagrebačka Banka, OTP Bank, Komercijalna Banka Skopje and  BRD Société Générale.

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