Corporate Taxes at the Heart of Proposed Burger King-Tim Hortons Deal

US fast food chain Burger King is in talks to acquire Canadian coffee and doughnut giant Tim Hortons. If it goes through, it would create the world’s third largest quick service restaurant chain, which would be worth approximately US$18bn.

The new company would be based in Canada and not the US for corporate tax reasons. The deal would be structured as a tax inversion transaction that would move Burger King’s domicile out of the US.

Tax inversions have proved controversial in the US, with Congressional Democrats in both the House and the Senate recently pushing for legislation that would make it more difficult for business to move their headquarters out of the country. Since 2011, 14 companies have moved their tax domicile to lower-tax countries to escape the 35 percent statutory US corporate tax rate.

Burger King majority owner 3G Capital would continue to own the majority of the shares of the new company on a pro forma basis. Remaining shares would be held by existing shareholders of both restaurant chains. Burger King and Tim Hortons would continue to operate as standalone brands.

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