News

The United States and Canada signed a new protocol to the U.S.-Canada income tax treaty, which will eliminate withholding tax on cross-border interest payments.

This treaty still must be approved by the U.S. and Canadian governments before it will go into effect.

The withholding tax repeal is expected to significantly increase the flow of capital from U.S. lenders and investors to Canadians, both through revolving and short-term debt facilities, as well as through the cross-border securitization of Canadian consumer and corporate receivables (such as credit cards, residential and commercial mortgages, lines of credit, and auto loans).

In addition to the zero rate on withholding taxes, the updated treaty also provides for binding arbitration of unresolved cases involving double taxation, updates tax rules on pensions for workers who cross the US/Canada border, and updates and clarifies other areas such as the treatment of partnerships.

For more information on this treaty, please contact a member of the SS&G tax department.