Form T3 SCH 130, Excessive Interest and Financing Expenses Limitation (Schedule 130)

Form T3 SCH 130, Excessive Interest and Financing Expenses Limitation (Schedule 130)

The Excessive interest and financing expenses limitation (EIFEL) rules limit the net amount of interest and financing expenses (IFE) (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.

Subsection 18.2(18) requires a trust to file Schedule 130 to determine the deductibility of its IFE and to determine its exempt IFE. The CRA has waived, under subsection 220(2.1), this requirement for trusts that meet both of the following conditions:

1. The trust is:

   • a bare trust that is not otherwise required to file an income tax return

   • exempt from Part I tax under section 149

   • an excluded entity

   • a testamentary trust as defined in subsection 108(1),

   • described in any of paragraphs (a), (a.1), (b), (d) or (e) of the definition of a trust in subsection 108(1), or

   • a non-resident exempt from Part I tax because of a tax treaty

   and

2. The trust is not a party to an election under the rules.

   If a trust meets these conditions and is not filing a Schedule 130, answer "No" to question 15 on the T3 income tax return. The trust must keep records supporting that it meets the conditions and provide Schedule 130 at the Minister's request.

   If a trust does not file Schedule 130 when it is required to, or files an incomplete schedule, paragraph 152(4)(b.8) allows the minister to reassess the return outside of the normal reassessment period.

   The EIFEL rules contain several election provisions that may, under certain circumstances, provide alternative tax treatment under the rules. The following election forms, as applicable, are to be filed:

   • T2224, Transitional Election Under the Excessive Interest and Financing Expenses Limitation Rules. To be eligible, the trust must be a fixed interest commercial trust

   • T2225, Group Ratio Rules Election Under Subsection 18.21(2) and Fair Value Adjustments Election Under Subsection 18.21(4)

   • T2226, Election to Transfer Cumulative Unused Excess Capacity Under Subsection 18.2(4). To be eligible, the trust must be a fixed interest commercial trust.

   • T2228, Specified Pre-regime Loss Election Under Subsection 18.2(1)

   • T2229, Election to Forgo a Foreign Accrual Property Loss Under Clause 95(2)(f.11)(ii)(E)

   For more information on the EIFEL elections and Schedule 130, go to Excessive interest and financing expenses limitation rules.

   
   
   

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