Clarification On The Protocol To Canada-U.S. Income Tax Convention

Readers will be aware that the September 21, 2007 protocol (the "Protocol") to the Canada-U.S. Income Tax Convention (the "Treaty") results in numerous changes to the Treaty. The July 10, 2008 Technical Explanation to the Treaty provides welcome clarification of many of the Protocol's provisions.

The Protocol makes significant changes to the existing provisions in the Treaty regarding pensions. Currently, Article XVIII (Pensions and Annuities) of the Treaty provides several rules governing the treatment of cross-border pension distributions and the ability to defer tax on income accrued in a foreign pension plan until distribution. However, the current Treaty does not provide any rules in respect of contributions and accrued benefits. While the changes that will be effected by the Protocol will not generally affect the taxation of distributions of pensions and annuities, the Protocol contains new