22:23:44 EDT Wed 29 Jun 2022
Enter Symbol
or Name
USA
CA



Silver Wheaton Corp
Symbol SLW
Shares Issued 404,097,861
Close 2015-07-06 C$ 22.21
Recent Sedar Documents

Silver Wheaton receives CRA proposal letter about taxes

2015-07-07 00:35 ET - News Release

Mr. Randy Smallwood reports

SILVER WHEATON REMAINS CONFIDENT IN BUSINESS STRUCTURE FOLLOWING RECEIPT OF CRA PROPOSAL LETTER

Silver Wheaton Corp. has received a proposal letter dated July 6, 2015, from the Canada Revenue Agency, in which the CRA is proposing to reassess Silver Wheaton under various rules contained in the Income Tax Act (Canada). The proposal outlines CRA's position that the transfer pricing provisions of the Income Tax Act (Canada) relating to income earned by the company's foreign subsidiaries outside of Canada should apply such that the income of Silver Wheaton subject to tax in Canada should be increased for the 2005 to 2010 taxation years by approximately $715-million ($567-million (U.S.)). The issuance of the proposal does not require the company to pay any amount to the CRA at this time. Management believes that the company has filed its tax returns and paid applicable taxes in compliance with Canadian tax law. Silver Wheaton intends to vigorously defend its tax-filing positions and is now in the process of preparing its response to the proposal.

"We remain confident in our business structure, which we believe is consistent with that typically used by Canadian companies, including Canadian streaming companies, that have international operations," said Randy Smallwood, president and chief executive officer of Silver Wheaton.

"Generally a company is taxable in Canada on its income earned in Canada, while non-Canadian income earned by foreign subsidiaries is not subject to Canadian income tax. However, with this proposal, the CRA is seeking to tax, within Canada, streaming income earned outside of Canada by our foreign subsidiaries related to mines located outside of Canada," added Mr. Smallwood.

Failing a resolution at the proposal stage, the CRA may proceed to issue notices of reassessment for one or more of the relevant taxation years. If the CRA reassesses Silver Wheaton on the basis outlined in the proposal, and assuming that Silver Wheaton would be assessed taxes on the foreign subsidiaries' income on the same basis as its Canadian income, Silver Wheaton currently estimates on a preliminary basis that it would be subject to federal and provincial tax of approximately $150-million (U.S.) in respect of the relevant taxation years. The proposal also indicates that the CRA is seeking to apply transfer pricing penalties of approximately $72-million ($57-million (U.S.)) in respect of the relevant taxation years. The proposal does not indicate the amount of interest or other penalties in respect of the relevant taxation years. Further, taxation years subsequent to 2010 remain open to audit by the CRA. Should Silver Wheaton receive a notice of reassessment from the CRA based upon the proposal, it intends to file a notice of objection within the required 90-day period provided under the Income Tax Act (Canada). In such a circumstance, Silver Wheaton would be required to pay 50 per cent of the reassessed amount of tax, interest and penalties. This amount, plus interest, would be refunded if the company were ultimately successful in challenging a reassessment. Any notice of objection would be reviewed by CRA's appeals division. Silver Wheaton also has the right to appeal directly to the Tax Court of Canada 91 days after the date of filing of any notice of objection.

The timing for the proposal process, the CRA appeals process and/or court process (if necessary following the issuance by CRA of any notices of reassessment) is uncertain. Regardless of the timing, Silver Wheaton intends to vigorously defend its tax-filing positions.

Please refer to the attached questions and answers for further details on the proposal letter.

Conference call details

A conference call will be held July 7, 2015, starting at 11 a.m. (Eastern Time) to discuss the contents of this news release. To participate in the live call, please use one of the following methods:

Dial toll-free from Canada or the United States:  888-231-8191

Dial from outside Canada or the U.S.:  647-427-7450

Passcode:  80922107

Live audio webcast:  At the Silver Wheaton website

Participants should dial in five to 10 minutes before the call.

The conference call will be recorded and available until July 14, 2015. The webcast will be available for one year. You can listen to an archive of the call by one of the following methods:

Dial toll-free from Canada or the U.S.:  855-859-2056

Dial from outside Canada or the U.S.:  416-849-0833

Passcode:  80922107

Archived audio webcast:  At the Silver Wheaton website

The CRA proposal letter

The following Q&A provides additional information on the CRA proposal:

What is a proposal letter?

A proposal letter is not a reassessment, but a letter, which sets out the possible adjustments to the taxpayer's income and CRA's reasons for a proposed reassessment.

Does the company have to pay any amounts to the CRA now?

No, the company is not required to pay any amounts to the CRA now.

When would the company have to pay any amounts to the CRA?

If the CRA issues one or more notices of reassessment, and the company objects to such notices of reassessment, it would be required to pay 50 per cent of the reassessed tax, interest and penalties. This amount would be refunded if the company were ultimately successful in challenging the reassessment. If the company does not object to the notice of reassessment, it will be required to pay the full reassessed amount. For clarity, if the CRA issues one or more notices of reassessment based on the proposal, the company intends to file notices of objection.

What further details can the company provide on the proposal?

The CRA is disputing the company's structure under which Silver Wheaton Corp.'s foreign subsidiaries buy and sell precious metal (silver and gold) in relation to streams on mines located outside of Canada, and Silver Wheaton buys and sells silver and gold in relation to streams on mines located in Canada. In issuing the proposal, the CRA is seeking to tax in Canada the income earned outside of Canada by the company's foreign subsidiaries. The company continues to review and consider all of the implications of the proposal and will vigorously defend its tax-filing positions.

What interest and penalties may be applied by the CRA?

The proposal indicates that the CRA is seeking to apply transfer pricing penalties of approximately $72-million ($57-million (U.S.)) in respect of the relevant taxation years. The CRA has not set out in the proposal the amount of interest and penalties other than transfer pricing penalties that may apply on a notice of reassessment. Interest and penalties will only apply to the extent that the company is required to pay reassessed tax. The company remains confident in its business structure and tax-filing positions.

What provisions of the Income Tax Act are referenced by the CRA in the proposal?

The CRA has issued the proposal based on the application of: (i) Section 247 (2) of the Income Tax Act (Canada) in respect of transfer pricing and (ii) Section 247 (3) of the Income Tax Act (Canada) in respect of a transfer pricing penalty.

What are the next steps for the company?

The company intends to vigorously defend its tax-filing positions, and it is in the process of preparing the company's response to the proposal. Failing a resolution at the proposal stage, the CRA may proceed to issue notices of reassessment. The company would have 90 days from the date of mailing of a notice of reassessment to file a notice of objection. Any notice of objection would be reviewed by CRA's appeals division. The company would have the right to appeal directly to the Tax Court of Canada 91 days after the date of filing of any notice of objection.

Does management have a view on the outcome of responding to the proposal or on objecting to a notice of reassessment?

Management believes that the company has filed its tax returns and paid applicable taxes in compliance with Canadian tax law. It intends to vigorously defend its tax-filing positions, and the company is in the process of preparing the company's response to the proposal. It is uncertain how long the proposal process will take. Similarly, if the CRA issues any notices of reassessment, it is uncertain how long the CRA appeals and/or court process, if necessary, could take before ultimate resolution. The income tax provisions cited in the proposal involve complex areas of the Income Tax Act (Canada) that have been subject to limited judicial interpretation. The application of these income tax provisions is also heavily dependent on the facts of each case. Therefore, the final outcome of any response to the proposal and any objection to notices of reassessment resulting from the proposal cannot be determined with any certainty, and there is, as with any appeals or court processes, risk of an unfavourable outcome. However the company remains confident in its business structure and its tax-filing positions.

How will this impact the company's ability to enter into new precious metal purchase agreements?

The company does not anticipate any changes to its approach on new precious metal purchase agreements, given the its confidence in its business structure and tax-filing positions at this time. The company believes that there continue to be strong and compelling reasons for mining companies to consider streaming transactions as an alternative source of financing and to enter into precious metal purchase agreements.

How does this proposal impact other streaming companies in Canada?

The company cannot comment on the specific manner in which other companies have structured their streaming operations. However, the company believes that Silver Wheaton's corporate structure is consistent with that typically used by Canadian companies, including Canadian streaming companies, that have international operations. With the proposal, the CRA is seeking to tax within Canada streaming income earned outside of Canada by the company's foreign subsidiaries related to mines located outside of Canada.

What if the company is unsuccessful in defending its tax-filing positions?

The company intends to vigorously defend its tax-filing positions and stand behind its business structure. If the company were ultimately unsuccessful in defending its filing positions, it would result in the company having to pay the full amount of any reassessed tax, interest and penalties, which would have an adverse impact on the company's financial position.

Does management have a view on other taxation years?

The taxation years subsequent to 2010 are not under audit; however, they remain open to audit by the CRA. Since the income tax provisions cited in the proposal involve complex areas of tax law and the application of those income tax provisions is heavily dependent on the facts for each taxation year and the particular attributes of each streaming contract, the company cannot speculate as to what the CRA position would be for those years. There is a risk that the CRA may take similar positions in those years as it has done in the proposal and that such positions will result in the issuance of notices of reassessment for material amounts.

When will the company provide a further update on this issue?

The company believes in conservative and transparent disclosure. It anticipates providing further updates as and when the company believes they are required, and for certainty, the company will provide further updates if and when the CRA issues one or more notices of reassessment.

We seek Safe Harbor.

© 2022 Canjex Publishing Ltd. All rights reserved.