S-2 , 39th Parliament, 2nd session Tuesday, October 16, 2007, to Sunday, September 7, 2008

On 18 October 2007, the Leader of the Government in the Senate introduced Bill S-2, An Act to amend the Canada-United States Tax Convention Act, 1984, in the Senate and it was given first reading.

Bill S-2 amends the Canada-United States Tax Convention Act, 1984 to implement a Protocol that amends the Convention between Canada and the United States of America with Respect to Taxes on Income and on Capital and adds Annexes A and B to it. The major change contained in the Protocol is the elimination of all withholding tax on cross-border payments of interest. The elimination is immediate for arm’s length payments of interest and phased in over three years for non-arm’s length payments. Other changes to the Convention include new rules for the treatment of “limited liability companies” (LLCs), pensions, stock options, corporate continuances and taxpayers who change residence from one country to the other. Annex A to the Convention clarifies the interpretation of a number of provisions of the Convention. Annex B to the Convention provides for a binding arbitration procedure.