Burger King (BKW) could lower its tax bill through a merger with Canadian coffee and doughnut chain Tim Hortons (THI) and moving its headquarters to Ontario, Canada.
KPMG ranked Canada first among 10 countries for general tax competitiveness this year, saying tax costs in Canada are 46.4% lower than the U.S. The U.S. has federal corporate tax rate of 35%. Including Canada’s 15% rate, Ontario has a provincial corporate tax rate of 26.5%.
NBF Note – Taxes at the local and state level still have to be paid. This will not change the fact that franchises in California have to pay all California taxes for any money made in the state. US Federal taxes have to be paid for money made in the United states. This has implications on overseas revenue, which is one of the main reasons for this merger.
Aside from the tax implications, Morgan Stanley analysts believe overseas growth is the primary motivation behind Burger King’s interest in buying Tim Hortons
Several inversion deals have developed just this year. U.S.-based AbbVie (ABBV) secured an agreement to buy Irish drug maker Shire (SHPG). Covidien (COV), another company domiciled in Ireland, recently agreed to sell itself to Medtronic (MDT).
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