Tag archives: tax treaties

Private equity and Canadian partnerships: tax considerations

Canada continues to be an attractive market for private equity (“PE“) investors with recent transactions highlighting significant investments into Canadian real estate and energy infrastructure assets.

Partnerships (particularly, limited partnerships) continue to be a popular PE vehicle, providing a means of pooling and aggregating investment funds and allowing for income or losses to be “flowed-through” to its members for Canadian tax purposes, subject to certain exceptions.

However, the use of partnerships with non-resident investors in PE investments raises two particular issues.

Withholding Tax

Part XIII of the Income Tax Act (Canada) (the “Tax Act“), requires that … Continue Reading

OECD report proposes new treaty shopping rules

In February we wrote about a discussion draft of Action 6 of the Action Plan on Base Erosion (BEPS Action Plan) developed by the Organisation for Economic Co-Operation and Development (OECD) at the request of the G20. In October, the OECD published its final report on Action 6 of the BEPS Action Plan.

Action 6 is intended to address the phenomenon of “treaty shopping”, a practice whereby a business structures itself to take advantage of tax treaties with favourable provisions that are ordinarily unavailable. One example of treaty shopping involves a corporation resident in a country … Continue Reading

Treaty shopping and BEPS considerations in the M&A context

Every acquisition requires careful tax planning early on in the process, especially when dealing with cross border acquisitions. One important consideration when a foreign company plans to acquire a Canadian company is the impact of any tax treaties that currently exist between the two jurisdictions. Tax treaties effectively reduce tax that would be otherwise payable in order to prevent double taxation or to create incentives for international investment in Canada. Without a tax treaty, dividends paid by a Canadian subsidiary to a foreign parent will be subject to 25% withholding tax. A tax treaty can reduce this amount to 15% … Continue Reading

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