While the multilateral instrument (MLI) may already affect a significant portion of Canada's treaties, additional tax treaties will be impacted throughout 2021 and 2022 as more of Canada's treaty partners complete domestic procedures and deposit their MLI ratification instruments with the OECD. As a result, affected taxpayers that rely on treaty benefits will need to keep a close eye on the full list of provisions that Canada's treaty partners agree to, whether they match with Canada's adopted provisions, and when the MLI is effective, in order to ensure that they meet their tax obligations and properly reflect these changes on their financial statements.

Canada indicated that the MLI would cover its treaties with 84 countries, and 68 of these countries reciprocated by listing their tax treaty with Canada as a covered treaty when signing on to the MLI. As of the OECD's last update on April 20, 2021, there are 42 reciprocating countries that have now filed their ratification instruments with the OECD, such that the MLI now affects (or will soon affect) 42 of Canada's tax treaties. This edition of TaxNewsFlash-Canada provides an overview of the withholding tax provisions and certain other MLI provisions Canada has adopted. In addition, this publication provides an update on 2021 and 2022 effective dates of the applicable MLI provisions, and which countries have adopted matching optional provisions that modify or will modify Canada's existing tax treaty provisions, for purposes of accessing treaty benefits under a particular treaty.

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