Technical Explanation Clarifies Protocol To Canada-U.S. Tax Treaty, Part One

On July 10, 2008 the U.S. Treasury Department released the Technical Explanation (the TE) to the September 21, 2007 protocol (the Protocol) to the Canada-U.S. Income Tax Convention (the Treaty) and the Canadian Department of Finance issued a press release indicating its agreement with the TE. Although the TE does not amend the Protocol or the Treaty itself, it is an important interpretive aid that sets out the intentions of Canada and the United States and clarifies several important aspects of the Protocol.

This update summarizes the most significant changes to the Treaty resulting from the Protocol and the main clarifications provided in the TE. Many of these Protocol changes will significantly impact existing cross-border structures and proposed transactions.