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ARTICLE · 01 APRIL 2016

Budget 2016: Significant Changes To The Taxation Of Linked Notes Announced

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The policy rationale for the proposed changes relating to the taxation of Linked Notes is unclear.

CanadaTax
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In Budget 2016, the new Government announced a significant change to the taxation of index and equity linked notes ("Linked Notes") described in paragraph 7000(1)(d) of the Income Tax Regulations (the "Regulations").

Background

Linked Notes are debt obligations, the return on which is "linked" in some manner to the performance of one or more reference assets or indexes. The appeal of Linked Notes for many investors is that they provide access to sophisticated investment strategies in a single, simple, cost-effective product. In recent years, demand for Linked Notes has grown rapidly and issuers have developed ever more specialized products to satisfy heightened demand, including foreign currency denominated notes.

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