A number of jurisdictions have been working on developing risk-free-rates (RFRs) to replace the existing interbank offering rates (IBORs) used as benchmarks, for example, for Canada, replacing CDOR by the Enhanced Canadian Overnight Repo Rate Average (CORRA) and, for the U.S., replacing USD LIBOR by the Secured Overnight Funding Rate (SOFR). Will any tax consequences be triggered by such IBOR-to-RFR transition? CRA responded:
In general terms, the determination of whether an obligation has been disposed of for Canadian income tax purposes depends on whether these events are considered to result in the discharge of the obligation and the substitution of a new obligation under the law governing the former obligation … .
Where the governing law is Canadian … making a RFR Amendment to an IBOR Instrument to accommodate the transition from IBOR to RFRs, in and of itself, would generally not constitute a disposition of the IBOR Instrument … .
Where foreign law governs an obligation … the legal effect of these events on such an obligation under the relevant foreign law must be considered in order to determine if the obligation has been disposed of … .