The fact that the 2007 Protocol to the Canada-U.S. Tax Treaty finally took effect on Dec. 15, 2008, may, at first blush, seem to be merely an arcane fact. But for just about anyone involved in a cross-border commercial transaction–and Canada and the U.S. do about $600 billion in trade annually–nothing could be further from the truth.
The protocol’s main feature is the elimination or phasing out of nonresident withholding tax on the vast majority of cross-border interest payments. This change should stimulate the inflow of American and other foreign capital to Canada (see “Securitization Impetus”).
