The
Canadian federal budget (Budget 2019) tabled on March 19, 2019
(Budget Day) contains important tax changes relevant to
participants in the stock lending market. It proposes modifications
to the way Canadian withholding tax applies to dividend equivalent
payments under the Income Tax Act (Canada) (the ITA) and
Canadian tax treaties. This
Osler Derivatives Advisory Group Update provides an overview of
certain Budget 2019 proposals relevant to stock loans, identifies
areas where they may usefully be refined, and describes our
understanding of subsequent amendments that may be made to these
proposals.
Under a securities lending transaction involving corporate
stock, one party (the lender) transfers stock to a second party
(the borrower) generally pursuant to an agreement under which the
borrower agrees to make payments to the lender equivalent to the
amount of dividends paid on the stock during the term of the
agreement, and provides collateral to the lender to
