Canada - Intersection of anti-treaty shopping proposals, BEPS action plan 

April 9: Canadian multinational and foreign corporations need to consider the alignment of Canada’s proposed anti-treaty shopping regime (announced by the Canadian government in its 2014 federal budget) with the OECD’s discussion draft on treaty abuse prevention under the base erosion and profit shifting (BEPS) action plan.

Read BEPS in TaxNewsFlash: Canada - Proposal to prevent “treaty shopping”

The OECD discussion draft was released pursuant to BEPS Action 6, "Prevent treaty abuse.”

KPMG observation

What changes could Canadian taxpayers see if Canada—or Canada’s treaty partners—adopt the proposals outlined in the OECD discussion draft?

Currently, the only tax treaty containing a comprehensive limitations on benefits (LOB) clause is the treaty between Canada and the United States. Therefore, some might claim Canada has limited experience in applying these more complex and restrictive requirements.

It is also not entirely clear how the Canadian proposals for a domestic anti-treaty shopping regime would interact or overlap with the OECD’s proposals, and whether Canadian taxpayers would be required to comply with two comprehensive, but different, anti-treaty shopping regimes.

Read an April 2014 report [PDF 58 KB] prepared by the KPMG member firm in Canada: OECD’s New Approach to Combat Treaty Abuse

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