Civeo Corp relocating to Canada to reduce taxes

The Houston based Civeo Corp., which provides lodgings for workers in Alberta’s oil sands, has announced its plans to relocate its headquarters to Canada because of the tax benefits.

Civeo was thinking about becoming a US based Real Estate Investment Trust, however, the tax rate of 25-26 percent in Canada is still four points lower than the tax imposed on REITs in the US. A REIT is a firm that owns and operates a range of real estate properties and mortgages.

Over the past couple of months Civeo has been looking at alternatives to try and cut down on the amount it has to pay in taxes.

The company does more than half of its business in Canada and is carrying out a “self-directed redomiciling,” which is permitted by the US tax code for companies that conduct most of their operations abroad.

This is not the same as tax inversion, which occurs when one firm buys a foreign firm so that they can relocate for tax purposes. For example, the recent merger between Burger King and Tim Hortons was a corporate inversion, as Burger King merged with Tim Hortons for the sole purpose of reducing its tax burden.

 

There is increasing concern in the US as huge multinational companies that originate from the US move overseas, which is eroding the U.S. tax base.

However, Civeo was originally a Canadian company founded in 1977 in the Peace River area and operated by the PTI Group. It rented out movie offices and offered housekeeping and catering services.

Houston based, Oil States International, Inc., bought the company out in 2001. It spun off the accommodation business, and on June 2 Civeo was publicly listed on the New York Stock Exchange, under the ticker symbol ‘CVEO’.

Civeo’s CEO, Bradley J. Dodson, said:

“A redomiciling of the company to Canada will improve operational alignment and expected shareholder returns.”

In an earnings outlook that Civeo released today, the company said:

“The company anticipates that reduced customer room demand in Canada in the fourth quarter will negatively impact occupancy and rates at its Canadian lodges.”