Tim Hortons’ effective tax rates and the Burger King merger


Nov. 20 2020, Updated 11:47 a.m. ET

Income tax expenses

Burger King (BKW) recently announced that it will acquire Tim Hortons (THI). In our acquisition series, we explained that this deal was structured as a tax inversion deal. Let’s take a look at what Tim Hortons’ effective tax rate has been over years.

Tim Hortons, which is headquartered in Ontario, Canada, had an effective tax rate of 28.3% in the second quarter. This increased from 26.1% in the corresponding quarter a year ago, when the company enjoyed a favorable tax impact. Effective tax rates for Tim Hortons were between 23% and 29% over the last four years, starting in 2010.

Burger King (BKW), which is headquartered in Florida, the United States, had an effective tax rate between 23% and 35%.

McDonald’s (MCD) and Yum! Brands (YUM) are both part of the Consumer Discretionary Select Sector SPDR Fund (XLY). They had an effective tax rate of 31.9% and 31.4%, respectively, for the financial year ended 2013.


Tim Hortons issued new debt of about $824 million, which it used for its share repurchase program. This move led to higher interest expenses compared to last year. The increase in interest expenses and tax expenses resulted in net income being unchanged at $113 million year-over-year.

Recapitalization involves restructuring of a company’s capital structure. For Tim Hortons, this meant exchanging equity for debt. We’ll cover the impact of this exchange in Part 11 of this series.

After the acquisition, Tim Hortons will still be run independently and many things will remain unchanged, according to Burger King’s management. Let’s now look at Tim Hortons’ management guidance in the next part of this series.

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