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ARTICLE · 12 MARCH 2008

Reducing Barriers To Foreign Investment In Canada?

Davies Ward Phillips & Vineberg LLP
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The focus of this article is mainly on dispositions by nonresidents of TCP that comprise shares of Canadian resident corporations that would be exempt from Canadian taxation under a tax treaty. The particular procedural issues and the intended ameliorating effects of the February 26 budget are considered next.

CanadaTax
Nathan Boidman
Nathan Boidman
Michael Kandev
Michael Kandev
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The authors would like to thank Fred Purkey of Davies Ward Phillips & Vineberg LLP for his helpful suggestions respecting this piece.

Reprinted from Tax Notes Int'l, March 10, 2008, p. 885 VOLUME 49, NUMBER 10 MARCH 10, 2008

A nonresident of Canada is subject to Canadian mainstream tax on a disposition of some types of Canadian-nexus property, called taxable Canadian property (TCP), unless a treaty exemption is available. To ensure the collection of the tax from nonresidents, section 116 of the Income Tax Act (Canada)1 provides a set of compliance requirements applicable to the vendor and purchaser of TCP. This section 116 certificate procedure has been besetting foreign investors in Canada for more than 35 years, and discontent with it has been festering since the recent advent of megabuck cross-border private equity acquisitions. 2

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