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News & Events


Conducting Business with Hybrid Tax Entities Between the United States and Canada: The Impact of New Paragraph 7 to Article IV of the U.S.-Canada Income Tax Treaty

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The Fifth Protocol (the “Protocol”) to the U.S.-Canada Income Tax Treaty (“Treaty”) entered into force on December 15, 2008. The Protocol is generally effective for tax years beginning on or after January 1, 2009; however, certain provisions of the Protocol have a delayed effective date, including Paragraph 7 of Article IV, which is effective beginning January 1, 2010.

The Protocol makes significant changes to the tax treatment of hybrid tax entities used to conduct cross-border activities. These changes to the Treaty necessitate a review and reassessment of cross-border structures used by U.S. persons to conduct business or make investments in Canada.

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