TSX:SLW
NYSE:SLW
VANCOUVER, July 6, 2015 /CNW/ - Silver Wheaton Corp.
("Silver Wheaton" or the "Company") (TSX:SLW) (NYSE:SLW) announces
that it has received a proposal letter dated July 6, 2015 (the "Proposal") from the Canada
Revenue Agency (the "CRA") in which the CRA is proposing to
reassess Silver Wheaton under various rules contained in the
Income Tax Act (Canada).
The Proposal outlines CRA's position that the transfer pricing
provisions of the Income Tax Act (Canada) relating to income earned by our
foreign subsidiaries outside of Canada should apply such that the income of
Silver Wheaton subject to tax in Canada should be increased for the 2005 to
2010 taxation years (the "Relevant Taxation Years") by
approximately Cdn$715 million
(US$567 million). The issuance of the
Proposal does not require the Company to pay any amount to the CRA
at this time.
Management believes that the Company has filed its tax returns
and paid applicable taxes in compliance with Canadian tax law.
Silver Wheaton intends to vigorously defend its tax filing
positions and is now in the process of preparing its response to
the Proposal.
"We remain confident in our business structure which we believe
is consistent with that typically used by Canadian companies,
including Canadian streaming companies, that have international
operations," said Randy Smallwood,
President and Chief Executive Officer of Silver Wheaton.
"Generally a company is taxable in Canada on its income earned in Canada, while non-Canadian income earned by
foreign subsidiaries is not subject to Canadian income tax.
However, with this Proposal, the CRA is seeking to tax, within
Canada, streaming income earned
outside of Canada by our foreign
subsidiaries related to mines located outside of Canada," added Smallwood.
Failing a resolution at the Proposal stage, the CRA may proceed
to issue notices of reassessment for one or more of the Relevant
Taxation Years. If the CRA reassesses Silver Wheaton on the basis
outlined in the Proposal, and assuming that Silver Wheaton would be
assessed taxes on the foreign subsidiaries' income on the same
basis as its Canadian income, Silver Wheaton currently estimates on
a preliminary basis that it would be subject to federal and
provincial tax of approximately US$150
million in respect of the Relevant Taxation Years. The
Proposal also indicates that the CRA is seeking to apply transfer
pricing penalties of approximately Cdn$72
million (US$57 million) in
respect of the Relevant Taxation Years. The Proposal does not
indicate the amount of interest or other penalties in respect of
the Relevant Taxation Years. Further, taxation years subsequent to
2010 remain open to audit by the CRA.
Should Silver Wheaton receive a notice of reassessment from the
CRA based upon the Proposal, we intend to file a notice of
objection within the required 90 day period provided under the
Income Tax Act (Canada). In
such a circumstance, Silver Wheaton would be required to pay 50% of
the reassessed amount of tax, interest and penalties. This amount,
plus interest, would be refunded if the Company were ultimately
successful in challenging a reassessment. Any notice of objection
would be reviewed by the CRA's Appeals Division. Silver Wheaton
also has the right to appeal directly to the Tax Court of
Canada 91 days after the date of
filing of any notice of objection.
The timing for the Proposal process, the CRA appeals process
and/or court process (if necessary following the issuance by CRA of
any notices of reassessment), is uncertain. Regardless of the
timing, Silver Wheaton intends to vigorously defend its tax filing
positions.
PLEASE REFER TO THE ATTACHED Q&A FOR FURTHER DETAILS ON
THE PROPOSAL LETTER.
Conference Call Details
A conference call will be held July 7,
2015, starting at 11:00am (Eastern
Time) to discuss the contents of this news release. To
participate in the live call, please use one of the following
methods:
Dial toll free from
Canada or the US:
|
888-231-8191
|
Dial from outside
Canada or the US:
|
647-427-7450
|
Pass code:
|
80922107
|
Live audio
webcast:
|
www.silverwheaton.com
|
Participants should dial in five to ten minutes before the
call.
The conference call will be recorded and available until
July 14, 2015. The webcast will be
available for one year. You can listen to an archive of the call by
one of the following methods:
Dial toll free from
Canada or the US:
|
855-859-2056
|
Dial from outside
Canada or the US:
|
416-849-0833
|
Pass
code:
|
80922107
|
Archived audio
webcast:
|
www.silverwheaton.com
|
About Silver Wheaton
Silver Wheaton is the largest pure precious metals streaming
company in the world. Based upon its current agreements, forecast
2015 annual attributable production is approximately 43.5 million
silver equivalent ounces[1], including
230,000 ounces of gold. By 2019, annual attributable production is
anticipated to increase significantly to approximately 51 million
silver equivalent ounces1, including 325,000 ounces of
gold. This anticipated growth is expected to be driven by the
Company's portfolio of low-cost and long-life assets, including
gold and precious metal streams on Vale's Salobo mine and Hudbay's
Constancia project.
_______________________________
1 Silver equivalent production forecast assumes a
gold/silver ratio of 72:1.
Q&A – The CRA Proposal Letter
The following Q&A provides additional information on the CRA
Proposal.
What is a proposal letter?
A proposal letter is not a reassessment but a letter which sets
out the possible adjustments to the taxpayer's income and the CRA's
reasons for a proposed reassessment.
Do we have to pay any amounts to the CRA now?
No, we are not required to pay any amounts to the CRA now.
When would we have to pay any amounts to the CRA?
If the CRA issues one or more notices of reassessment, and we
object to such notices of reassessment, we would be required to pay
50% of the reassessed tax, interest and penalties. This amount
would be refunded if we were ultimately successful in challenging
the reassessment. If we do not object to the notice of
reassessment, we will be required to pay the full reassessed
amount.
For clarity, if CRA issues one or more notices of reassessment
based on the Proposal, the Company intends to file notices of
objection.
What further details can we provide on the Proposal?
The CRA is disputing our structure under which Silver Wheaton
Corp.'s foreign subsidiaries buy and sell precious metal (silver
and gold) in relation to streams on mines located outside of
Canada and Silver Wheaton Corp.
buys and sells silver and gold in relation to streams on mines
located in Canada. In issuing the
Proposal, the CRA is seeking to tax in Canada the income earned outside of
Canada by our foreign
subsidiaries. The Company continues to review and consider all of
the implications of the Proposal and will vigorously defend its tax
filing positions.
What interest and penalties may be applied by the
CRA?
The Proposal indicates that the CRA is seeking to apply transfer
pricing penalties of approximately Cdn$72
million (US$57 million) in
respect of the Relevant Taxation Years. The CRA has not set out in
the Proposal the amount of interest and penalties other than
transfer pricing penalties that may apply on a notice of
reassessment. Interest and penalties will only apply to the extent
that the Company is required to pay reassessed tax. The Company
remains confident in its business structure and tax filing
positions.
What provisions of the Income Tax Act are referenced by the
CRA in the Proposal?
The CRA has issued the Proposal based on the application of (i)
Section 247(2) of the Income Tax Act (Canada) in respect of transfer pricing and
(ii) Section 247(3) of the Income Tax Act (Canada) in respect of a transfer pricing
penalty.
What are the next steps for us?
We intend to vigorously defend our tax filing positions and we
are in the process of preparing our response to the Proposal.
Failing a resolution at the Proposal stage, the CRA may proceed to
issue notices of reassessment. We would have 90 days from the date
of mailing of a notice of reassessment to file a notice of
objection. Any notice of objection would be reviewed by the CRA's
Appeals Division. We would have the right to appeal directly to the
Tax Court of Canada 91 days after
the date of filing of any notice of objection.
Does management have a view on the outcome of responding to
the Proposal or on objecting to a notice of reassessment?
Management believes that we have filed our tax returns and paid
applicable taxes in compliance with Canadian tax law. We intend to
vigorously defend our tax filing positions and we are in the
process of preparing our response to the Proposal.
It is uncertain how long the Proposal process will take.
Similarly, if the CRA issues any notices of reassessment, it is
uncertain how long the CRA appeals and/or court process, if
necessary, could take before ultimate resolution. The income tax
provisions cited in the Proposal involve complex areas of the
Income Tax Act (Canada) that have been subject to limited
judicial interpretation. The application of these income tax
provisions is also heavily dependent on the facts of each case.
Therefore, the final outcome of any response to the Proposal and
any objection to notices of reassessment resulting from the
Proposal cannot be determined with any certainty, and there is, as
with any appeals or court processes, risk of an unfavourable
outcome. However we remain confident in our business structure and
our tax filing positions.
How will this impact our ability to enter into new precious
metal purchase agreements?
We do not anticipate any changes to our approach on new precious
metal purchase agreements, given our confidence in our business
structure and tax filing positions at this time. We believe that
there continue to be strong and compelling reasons for mining
companies to consider streaming transactions as an alternative
source of funding and to enter into precious metal purchase
agreements.
How does this Proposal impact other streaming companies in
Canada?
We cannot comment on the specific manner in which other
companies have structured their streaming operations. However, we
believe that Silver Wheaton's corporate structure is consistent
with that typically used by Canadian companies, including Canadian
streaming companies, that have international operations. With the
Proposal, the CRA is seeking to tax within Canada streaming income earned outside of
Canada by our foreign subsidiaries
related to mines located outside of Canada.
What if we are unsuccessful in defending our tax filing
positions?
We intend to vigorously defend our tax filing positions and
stand behind our business structure. If we were ultimately
unsuccessful in defending our filing positions, it would result in
us having to pay the full amount of any reassessed tax, interest
and penalties, which would have an adverse impact on our financial
position.
Does management have a view on other taxation years?
The taxation years subsequent to 2010 are not under audit,
however they remain open to audit by the CRA. Since the income tax
provisions cited in the Proposal involve complex areas of tax law
and the application of those income tax provisions is heavily
dependent on the facts for each taxation year and the particular
attributes of each streaming contract, we cannot speculate as to
what the CRA position would be for those years. There is a risk
that the CRA may take similar positions in those years as they have
done in the Proposal and that such positions will result in the
issuance of notices of reassessment for material amounts.
When will we provide a further update on this issue?
We believe in conservative and transparent disclosure. We
anticipate providing further updates as and when we believe they
are required and for certainty, we will provide further updates if
and when the CRA issues one or more notices of reassessment.
CAUTIONARY NOTE REGARDING FORWARD LOOKING-STATEMENTS
The information contained herein contains "forward-looking
statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995 and "forward-looking
information" within the meaning of applicable Canadian securities
legislation. Forward-looking statements, which are all statements
other than statements of historical fact, include, but are not
limited to, statements with respect to Silver Wheaton's confidence
in its business structure, Silver Wheaton's response to the
Proposal, the potential reassessment of Silver Wheaton's tax
filings by the CRA, Silver Wheaton's position relating to any
dispute with the CRA, the estimate of potential taxes, penalties
and interest payable to the CRA, the impact of potential taxes,
penalties and interest payable to the CRA, Silver Wheaton's
intention to defend potential reassessments if issued by the CRA,
Silver Wheaton's view of its tax filing positions, possible audits
for taxation years subsequent to 2010, Silver Wheaton's intention
to file future tax returns in a manner consistent with previous
filings, the length of time it would take to resolve the Proposal
or an objection to any reassessment, projected increases to Silver
Wheaton's production and cash flow profile, the expansion and
exploration potential at the Salobo mine, projected changes to
Silver Wheaton's production mix, the anticipated increases in total
throughput at the Salobo mine, the estimated future production, the
future price of commodities, the future price of silver or gold,
the estimation of mineral reserves and mineral resources, the
realization of mineral reserve estimates, the timing and amount of
estimated future production (including 2015 and 2019 attributable
annual production and produced but not yet delivered ounces),
estimated costs of future production, reserve determination,
estimated reserve conversion rates, any statements as to future
dividends, the ability to fund outstanding commitments and continue
to acquire accretive precious metal stream interests and
assessments of the impact and resolution of various legal and tax
matters. Generally, these forward-looking statements can be
identified by the use of forward-looking terminology such as
"plans", "expects" or "does not expect", "is expected", "budget",
"confident", "scheduled", "estimates", "forecasts", "projects",
"intends", "anticipates" or "does not anticipate", or "believes",
"potential", or variations of such words and phrases or statements
that certain actions, events or results "may", "could", "would",
"might" or "will be taken", "occur" or "be achieved".
Forward-looking statements are subject to known and unknown
risks, uncertainties and other factors that may cause the actual
results, level of activity, performance or achievements of Silver
Wheaton to be materially different from those expressed or implied
by such forward-looking statements, including but not limited to:
differences in the interpretation or application of tax laws and
regulations, Silver Wheaton's interpretation of, or compliance
with, tax laws, is found to be incorrect, Silver Wheaton's
operations or ability to enter into precious metal purchase
agreements is materially impacted as a result of any reassessment,
any challenge by the CRA of Silver Wheaton's tax filings is
successful and the potential negative impact to Silver Wheaton's
previous and future tax filings, the tax impact to Silver Wheaton's
business operations is materially different than currently
contemplated, any reassessment of Silver Wheaton's tax filings and
the continuation or timing of any such process is outside Silver
Wheaton's control, any requirement to pay reassessed tax, Silver
Wheaton is not assessed taxes on the foreign subsidiary's income on
the same basis that it pays taxes on its Canadian income, interest
and penalties will have an adverse impact on the financial position
of Silver Wheaton, litigation risk associated with a challenge to
Silver Wheaton's tax filings, changes to tax legislation and
administrative policies, fluctuations in the price of commodities,
the absence of control over the mining operations from which Silver
Wheaton purchases silver or gold (the "Mining Operations") and
risks related to these Mining Operations including risks related to
fluctuations in the price of the primary commodities mined at such
operations, actual results of mining and exploration activities,
environmental, economic and political risks of the jurisdictions in
which the Mining Operations are located and changes in project
parameters as plans continue to be refined, risks relating to
having to rely on the accuracy of the public disclosure and other
information Silver Wheaton receives from the owners and operators
of the Mining Operations as the basis for its analyses, forecasts
and assessments relating to its own business, risks relating to
production estimates from Mining Operations, credit and liquidity
risks, hedging risk, competition in the mining industry, risks
related to Silver Wheaton's acquisition strategy, risks related to
the market price of Silver Wheaton's shares, risks related to
Silver Wheaton's holding of long-term investments in other
exploration and mining companies, risks related to the declaration,
timing and payment of dividends, the ability of Silver Wheaton and
the Mining Operations to retain key management employees or procure
the services of skilled and experienced personnel, risks related to
claims and legal proceedings against Silver Wheaton or the Mining
Operations, risks relating to unknown defects and impairments,
risks related to the adequacy of internal control over financial
reporting, risks related to governmental regulations, including
environmental regulations, risks related to international
operations of Silver Wheaton and the Mining Operations, risks
relating to exploration, development and operations at the Mining
Operations, the ability of Silver Wheaton and the Mining
Operations to obtain and maintain necessary permits, the ability of
Silver Wheaton and the Mining Operations to comply with applicable
laws, regulations and permitting requirements, lack of suitable
infrastructure and employees to support the Mining Operations,
uncertainty in the accuracy of mineral reserves and mineral
resources estimates, production estimates from Mining Operations,
inability to replace and expand mineral reserves, uncertainties
related to title and indigenous rights with respect to the mineral
properties of the Mining Operations, commodity price
fluctuations, the ability of Silver Wheaton and the Mining
Operations to obtain adequate financing, the ability of Mining
Operations to complete permitting, construction, development and
expansion, challenges related to global financial conditions, risks
related to future sales or issuance of equity securities, as well
as those factors discussed in the section entitled "Description of
the Business – Risk Factors" in Silver Wheaton's Annual Information
Form available on SEDAR at www.sedar.com and in Silver Wheaton's
Form 40-F on file with the U.S. Securities and Exchange Commission
in Washington, D.C.
Forward-looking statements are based on assumptions management
believes to be reasonable, including but not limited to: that
Silver Wheaton will be successful in resolving the Proposal or
challenging any reassessment by CRA, that Silver Wheaton has
properly considered the application of Canadian tax law to its
structure and operations, that Silver Wheaton has filed its tax
returns and paid applicable taxes in compliance with Canadian tax
law, that Silver Wheaton will not change its operations as a result
of any reassessment, that Silver Wheaton's ability to enter into
new precious metal purchase agreements will not be impacted by any
reassessment, expectations and assumptions concerning prevailing
tax laws and the potential amount that could be assessed as
additional tax, penalties and interest by the CRA, that any foreign
subsidiary income would be subject to the same tax calculations as
Silver Wheaton's Canadian income, the continued operation of the
Mining Operations, no material adverse change in the market price
of commodities, that the Mining Operations will operate and the
mining projects will be completed in accordance with public
statements and achieve their stated production estimates, the
continuing ability to fund or obtain funding for outstanding
commitments, the ability to source and obtain accretive precious
metal stream interests, expectations regarding the resolution of
legal and tax matters, that Silver Wheaton will be successful in
challenging any reassessment by the CRA, the estimate of the
carrying value of the precious metal purchase agreements (as
defined in the Annual Information Form) and such other assumptions
and factors as set out herein.
Although Silver Wheaton has attempted to identify important
factors that could cause actual results, level of activity,
performance or achievements to differ materially from those
contained in forward-looking statements, there may be other factors
that cause results, level of activity, performance or achievements
not to be as anticipated, estimated or intended. There can be no
assurance that forward-looking statements will prove to be accurate
and even if events or results described in the forward-looking
statements are realized or substantially realized, there can be no
assurance that they will have the expected consequences to, or
effects on, Silver Wheaton. Accordingly, readers should not place
undue reliance on forward-looking statements and are cautioned that
actual outcomes may vary. The forward-looking statements included
herein for the purpose of providing investors with information to
assist them in understanding Silver Wheaton's expected performance
and may not be appropriate for other purposes. Any forward looking
statement speaks only as of the date on which it is made. Silver
Wheaton does not undertake to update any forward-looking statements
that are included or incorporated by reference herein, except in
accordance with applicable securities laws.
This release contains references to United States dollars and Canadian dollars.
All amounts payable to CRA are payable in Canadian dollars. All
dollar amounts referenced, unless otherwise indicated, are
expressed in United States
dollars. Canadian dollars are referred to as "Cdn$". US dollar
amounts have been converted from Canadian dollar amounts using the
noon Bank of Canada exchange rate
on July 6, 2015 of 0.7920.
SOURCE Silver Wheaton Corp.