Cross-Border Takeaways From The 2021 Federal Budget

Earlier this year, Finance Minister Chrystia Freeland tabled Budget 2021.

This budget is Minister Freeland's first as Finance Minister, as well as Canada's first since the COVID-19 pandemic began (you can read our general discussion of the 2021 Budget here). 

Included in Budget 2021 were proposed new measures that specifically targeted taxpayers with a cross-border presence. Arguably, the two main cross-border proposals in Budget 2021 were the increased limitations on interest deductibility and the new rules addressing "hybrid mismatch arrangements".

New limitations on interest deductibility

The proposal to limit the deductibility of interest seeks to incorporate into Canadian domestic law the recommendations set out in the OECD's BEPS Action 4 report. The deductibility of cross-border interest has long been subject to BEPS considerations, as (among other concerns) excessive interest expense can be incurred by Canadian businesses and paid to related