Excess Capacity

"Regarding the situation where one member of a pre-regime group had September 30 taxation year ends and significant excess capacity for EIFEL purposes compared to other members of the group, which had calendar taxation year ends, CRA essentially confirmed that the first member would need to determine its excess capacity for its first regime year (commencing on October 1. 2023) using the 40% ratio of permissible expenses, but that excess capacity carried forward to subsequent taxation years would be recalculated using the 30% ratio applicable to those years.\n\nIn particular, CRA confirmed that the corporate group would need to determine any pre-regime excess capacity and any first regime year’s excess capacity twice: once using the 40% ratio of permissible expenses that generally applies for taxation years beginning on or after October 1, 2023 and before January 1, 2024 for purposes of determining the taxpayer’s cumulative unused excess capacity (CUEC) for those years; and a second time using the 30% ratio that applies for subsequent taxation years, for the purpose of determining the taxpayer’s cumulative unused capacity for those subsequent years (relevantly, for taxation years beginning in 2024, 2025 and 2026)."