The Canadian Imperial Bank of Commerce (CIBC) announced earlier this week that it is to receive a $689 million tax refund after the sale of its shares in failed telecoms company Global Crossing.
CIBC had previously agreed to pay tax on certain parts of its earnings due to ambiguity over how the former Revenue Canada would treat such income for tax purposes. The recent settlement relates to largely foreign based earnings from the period 1996 through 2000, and encompasses the shares that the bank held in Global Crossing, of which the Canadian revenue department now says a portion was non-taxable.
Global Crossing was based in Bermuda and expanded rapidly during the technology boom of the late 1990's. However, the firm was unable to bear the weight of a massive debt burden and subsequently collapsed. Nevertheless, CIBC booked healthy profits from the sale of shares in Global Crossing. Earnings from foreign subsidiaries are generally only taxable when redistributed back to Canada.
According to reports, CIBC also stands to make a $150 million loss from the selling off of bad loans and tax charges in the United States.
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