Franco-Nevada Settles Tax Disputes: A Strategic Move
Franco-Nevada Corporation Reaches Landmark Settlement
(in U.S. dollars unless otherwise noted)
Franco-Nevada Corporation, a well-known player in the mining sector, has announced its significant progress towards resolving its longstanding tax disputes with the Canada Revenue Agency (CRA). This milestone relates to the tax reassessments connected to transfer pricing rules from the years 2013 to 2019. The dispute mainly concerned income produced by two of its completely owned international subsidiaries.
Understanding the Settlement
After thorough discussions, Franco-Nevada has successfully reached an agreement that will eliminate any tax payments owed by them in Canada on foreign earnings from its subsidiaries, specifically Franco-Nevada Barbados Corporation and Franco-Nevada Mexico Corporation. This settlement encapsulates multiple key points:
Key Features of the Settlement
One of the most important aspects of this settlement is the adjustment regarding the service fees charged by Franco-Nevada to its subsidiaries. The mark-up on the costs associated with providing these services will be increased from the previous range of 7-20% to a new standard of 30%. Through this process, the company anticipates an imposition of Canadian tax on an additional income amounting to C$1.4 million for the specified taxation years.
Future Implications
Thanks to the application of non-capital losses, Franco-Nevada projects no significant cash tax implications from this settlement for the past taxation years. Moreover, penalties related to transfer pricing initially noted in the earlier reassessments are expected to be reversed, along with an adjustment of interest charges based on this agreement.
Support from Leadership
Paul Brink, President and CEO of Franco-Nevada, expressed enthusiasm in reaching this agreement, viewing it as a major achievement for the company and its shareholders. He noted the positive impact this settlement has on the firm’s plans for global expansion and growth. He stated, "This settlement provides greater investment certainty for our global growth ambitions and puts the tax dispute behind us. We can now continue to focus on adding high-quality, long-life assets to our diverse portfolio as we have done over the last 18 months with approximately $3 billion of transactions being completed."
Corporate Overview
Franco-Nevada Corporation is proud to be recognized as a leading gold-focused royalty and streaming company. It holds the most diversified and extensive portfolio of cash-flow assets available in the industry. Their innovative business model offers investors an opportunity to benefit from gold price fluctuations and exploration potential, while maintaining minimal exposure to cost increases. The company diligently utilizes its free cash flow to enhance its asset portfolio and provide dividends to its shareholders.
Stock Exchange Information
Franco-Nevada Corporation is traded under the symbol FNV on both the Toronto and New York stock exchanges. This positioning underscores Franco-Nevada's reputation as a preferred gold investment choice.
Frequently Asked Questions
What does the settlement with CRA entail?
The settlement resolves tax disputes from the years 2013 to 2019, eliminating Canadian taxes on foreign earnings and adjusting service fees.
How does this settlement affect Franco-Nevada's financial obligations?
Franco-Nevada anticipates no significant cash tax due to past losses, resulting in favorable financial implications.
What future tax implications could arise from this settlement?
While the settlement is not legally binding for subsequent years, established principles may apply unless material changes occur.
Who is Franco-Nevada Corporation?
Franco-Nevada Corporation is a premier gold royalty and streaming company, focused on developing a diversified portfolio of cash-flow producing assets.
How does Franco-Nevada plan to utilize its free cash flow?
The company intends to expand its asset base and distribute dividends to shareholders, maintaining a robust growth trajectory.
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