The Canadian Revenue Authority (CRA) has proposed that it reassess Silver Wheaton’s tax treatment such that C$715m (US$567m) of income in the years 2005-2010 is re-characterised as earned by the parent, rather than a foreign subsidiary. SLW estimates that the federal and provincial tax associated with such a reassessment could be in the order of US$150m (26.5% implied marginal rate), or US$0.37/share. The CRA is also seeking a transfer pricing penalty of C$72m (US$57m, or US$0.14/share). Silver Wheaton has stated that it will defend its position vigorously. In the event of an unfavourable outcome, interest would also be payable, we estimate c US$37.5m (US$0.09/share) at a 3% compounded rate.
