Canada has taken an important step towards ratifying the multilateral instrument (MLI). On May 28, 2018, the Canadian government introduced a Notice of Ways and Means Motion (NWMM) containing proposed legislation (the Implementation Act) to implement the MLI in Canadian law. Canada also announced that it will adopt several optional provisions in the MLI, in addition to the minimum standards that it had already agreed to adopt.
Canada’s adoption of these optional MLI changes will affect some cross-border investment (although the changes are not as far-reaching as the treaty abuse and dispute resolution provisions, which Canada had already agreed to adopt). The 365-day tests for dividends and capital gains will likely have the greatest impact, as they represent the greatest departure from the existing rules in many Canadian tax treaties. These changes will take effect for a particular treaty only if the other treaty partner agrees, so the choices made by Canada’s treaty partners are also important.
See the attached PwC Tax Insights newsalert for more details.
