Canada - Future changes may focus on hybrid mismatch arrangements 

April 4: Taxpayers may want to consider the impact of potential future tax changes that Canada may introduce to curtail the use of “hybrid mismatch arrangements” as a result of the OECD’s progress on its hybrid mismatch arrangements consultations.

The OECD launched its consultation process with the release of two detailed consultation papers on 19 March 2014 as part of its action plan on base erosion and profit shifting (BEPS). The OECD’s consultation period on hybrid mismatch arrangements ends on 3 May 2014.

Canadian companies with certain arrangements, including a hybrid instrument—such as preferred share investments in a Luxembourg financing company or a U.S. corporate group—or a hybrid entity—such as a U.S. “tower” financing structure—may want to follow the OECD consultations. Likewise, foreign-based companies with operations in Canada will want to consider the effect of potential tax changes on their financing arrangements into Canada.

Read an April 2014 report [PDF 68 KB] prepared by the KPMG member firm in Canada: OECD Takes Aim At International Hybrid Mismatch Arrangements

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