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Highlights
CROSS-BORDER FINANCE
Hybrid Entities and Dually-chartered Entities –
International Tax Developments
Richard Tremblay, Matias Milet
Richard Tremblay and Matias Milet examine the
potential impact of three international tax developments on outbound and
inbound cross-border financing structures that utilize entities that are
treated as conduits in one jurisdiction and as corporations in another:
(i) the Canada Revenue Agency's signalling in a recent view that it may
adopt an OECD commentary position denying treaty benefits to certain
hybrid entities; (ii) the proposed amendment to the U.S.-Canada income
tax treaty that would make companies that are chartered in both the U.S.
and Canada dual residents for treaty purposes; and (iii) proposed U.S.
regulations dealing with entities chartered in both the U.S. and another
jurisdiction. The authors note that development (i) would have a major
impact on certain inbound financing structures, while developments (ii)
and (iii) generally should not affect hybrid entity cross-border
financings.
FINANCING STRUCTURES
Polish-based Financing Structure to Finance U.S.
Subsidiaries of Canadian Multinationals
Penny Woolford
Penny Woolford examines the consequences of recent
tax law changes in Hungary and the current renegotiation of the
Hungary-U.S. tax treaty that could cause a Hungarian-based financing
structure used to finance businesses in the United States to be
ineligible for the treaty benefits it currently enjoys. The Hungarian
Offshore Company ("HOC") regime is being dismantled and these
entities will be subject to regular Hungarian corporate tax after 2005.
In addition, the new treaty with the U.S. will probably include a modern
limitation on benefits ("LOB") article that could result in a
30% withholding tax on interest payments to (former) HOCs. Poland is an
attractive alternative to Hungary for financing into the U.S. because
its treaty with the U.S. provides for 0% withholding tax on related
party interest, does not contain an LOB article, and is currently not
under renegotiation.
U.S. WITHHOLDING TAX
U.S. Withholding Tax Developments Since 2001
Mark Mitchell
Mark Mitchell summarizes changes in U.S. withholding
taxes since 2001, including developments in partnership withholding tax
under section 1446 of the Internal Revenue Code, withholding on real
property dispositions under section 1445, issues relating to obtaining
taxpayer identification numbers from the Internal Revenue Service and
changes relevant to financial institutions acting as "qualified
intermediaries" under section 1441. The author explains that the
changes, while not major, can have a significant impact on Canadians
with cross-border investments.
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Board
Richard G. Tremblay
Editor-in-Chief
Osler, Hoskin & Harcourt LLP
Gabriel J. Hayos
KPMG LLP
Edward A. Heakes
Macleod Dixon
Michael J. Maikawa
PricewaterhouseCoopers LLP
C. Andrew McAskile
PricewaterhouseCoopers LLP
Joel A. Nitikman
Fraser Milner Casgrain LLP
Michael J. O’Keefe
Thorsteinssons
James M. Parks
Cassels Brock & Blackwell LLP
Shawn D. Porter
Deloitte & Touche LLP |
