Schedule 130, Excessive Interest and Financing Expenses Limitation

Schedule 130, Excessive Interest and Financing Expenses Limitation

New EIFEL rules limit the net amount of interest and financing expenses (interest and financing expenses minus interest and financing revenues) that can be deducted. For tax years starting on or after January 1, 2024, the limit is generally equal to 30% of adjusted taxable income. As a transition measure, a ratio of 40% applies to tax years starting on or after October 1, 2023, and before January 1, 2024.

Complete Schedule 130 for tax years starting on or after October 1, 2023, if the corporation is:

• subject to the EIFEL rules primarily contained in sections 18.2 and 18.21 of the Act (unless it meets the definition of an excluded entity), or

• a party to any election under the EIFEL rules

An excluded entity for a tax year generally includes:

• a corporation that was a Canadian-controlled private corporation throughout the tax year that, together with any associated corporations, has taxable capital employed in Canada of less than $50 million

• a Canadian-resident corporation that, together with any eligible group entities, has aggregate net interest and financing expenses of $1 million or less

• a Canadian-resident corporation that, together with any eligible group entities:

  • carries on all or substantially all business, undertakings, and activities in Canada and has limited ties to non resident persons

  • has all or substantially all of its interest and financing expenses (IFE) paid or payable to persons or partnerships that are not tax-indifferent and that do not deal at arm's length with the taxpayer or any eligible group entity

For more details, see the definitions of excluded entity and eligible group entity in subsection 18.2(1).

Subsection 18.2(18) requires a corporation that is subject to the EIFEL rules to file Schedule 130 to determine the deductibility of its IFE and to determine its exempt IFE.

If a corporation does not file the Schedule 130, or files the schedule without including all the information required, paragraph 152(4)(b.8) allows the minister to reassess the return outside of the normal reassessment period.

For more information on how to complete this schedule, go to canada.ca/cra-eifel.

References
Sections 18.2 and 18.21

Calculation schedules

You may also have to use various calculation schedules to complete the rest of your return. You will find a list of these schedules on page 2 of the return and details about each of these schedules in the following chapters.

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