Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE) announced in a news release that it reached a settlement with the Canada Revenue Agency, thereby resolving the pending tax dispute surrounding income generated through Wheaton International, its foreign subsidiaries.
"The terms of the settlement are an excellent outcome for Wheaton and its shareholders," President and CEO Randy Smallwood said in the release. "This settlement removes uncertainty with the use of our business model going forward. . .With the clarity provided by this settlement, I look forward to our company again being valued solely based on the virtues of its excellent portfolio of high-quality assets and strong growth profile over the coming years."
In the past, after a reassessment related to transfer pricing rules, the CRA required the mining company to pay taxes on revenue earned outside of Canada for the years 2005 through 2018. Wheaton disagreed and appealed.
The newly agreed upon settlement between the two parties dictates that "foreign income on earnings generated by Wheaton International will not be subject to tax in Canada," the release noted.
However, Wheaton must adjust the fee it charges for the services it provides to Wheaton International, revenue from which will be subject to Canadian tax. Wheaton must increase the mark-up on that fee to 30% from 20%. The fee must incorporate costs incurred by Wheaton when raising capital to finance streaming transactions that Wheaton International enters into.
These new transfer pricing rules will apply to all years after 2010, including the years 2011 to 2015, which are currently being audited.
Finally, Wheaton will be reimbursed for all past paid transfer pricing penalties, with interest adjusted accordingly.
"After the application of noncapital losses," according to the release, "Wheaton does not anticipate any additional cash taxes will arise in respect of the 2005 to 2010 taxation years as a result of the settlement."
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