Tax Treaty Change Creates Opportunity

Changes in Canada's tax laws and the tax treaty with the United States have created opportunities for Canadian companies.  Starting January 1st Canadian companies can borrow from arms-length foreign lenders and not have to pay the 25% withholding tax. For non-arms length lenders the new rules will gradually eliminate the withholding by 2010. Previously, this was a barrier for Canadian companies to obtain financing outside of Canada. Foreign lenders are already taking on exchange rate risk and having the added burden of a 25% withholding made lending to Canadian companies an unattractive investment. This change in tax laws helps to globalize investments. Many U.S. investors are looking to Canada as an attractive investment opportunity as their own economy continues to struggle. With the global tightening of credit this might be a welcome opportunity for Canadian companies to find alternative financing options for their companies.