North American Corporate Lawyer

a journal devoted to transnational business law issues

CORPORATIONS/PARTNERSHIPS

Amendments to the Canada-U.S. Income Tax Treaty Have a Significant Impact on the Use of Hybrid Entities in Cross-border Structures
Peter Jovicic
The Fifth Protocol (the "Protocol") to the Canada–United States Income Tax Convention (1980) will have many ramifications for cross-border structures. The Protocol has provisions directed at limited liability companies, unlimited liability companies and other fiscally transparent entities. Many conventional structures may no longer be viable, especially structures with fiscally transparent entities. The Protocol was signed on September 21, 2007 and controversy has since ensued as to its interpretation. Unlike the language of most tax conventions, the language of the Protocol is often both complex and ambiguous. Peter Jovicic reviews the Protocol as it may apply to fiscally transparent entities, explains the ramifications for many cross-border structures, and identifies the ambiguities. While the full extent of the Protocol's impact on the use of hybrid entities is still unclear, it is likely that the structuring of Canada-U.S. cross-border investments will be dramatically altered.

LEGISLATION

The New Functional Currency Election
Liam Fitzgerald
Bill C-28, which received Royal Assent on December 14, 2007, includes new section 261, part of which is the new functional currency election, which will allow certain taxpayers to compute their Canadian tax results in currency other than the Canadian dollar (currently limited to the British pound, the Euro or the U.S. dollar). Liam Fitzgerald provides a broad overview of these rules and their background, reviewing the conditions for their application, transitional rules, and the interaction of the rules with various business mergers and transfers. The author concludes with a number of observations, highlighting certain interpretive issues in the legislation. The election will be of interest to Canadian corporate taxpayers whose financial reporting is in a non-Canadian currency who want to align their tax reporting with their financial reporting.

FOREIGN INVESTORS

Foreign State Investors Face Greater Scrutiny in Canada
Sandy Walker

Board

Riyaz Dattu
Editor-in-Chief
Osler, Hoskin & Harcourt LLP

David A. Chaikof
Torys LLP

H. Scott Fairley
Theall Group LLP

Paul M. Lalonde
Heenan Blaikie LLP

John Lorn McDougall, QC
Fraser Milner Casgrain LLP

James P. McIlroy
McIlroy & McIlroy Inc.

Julie A. Soloway
Blake, Cassels & Graydon LLP

Brenda C. Swick
McCarthy Tétrault LLP