HYBRID LOAN ARRANGEMENT Æ··Åˆ UPDATE

For more details about the Canadian anti-hybrid rules contained in the first package of draft legislation and presumptively currently effective, please see Osler Update dated May 4, 2022.

The draft anti-hybrid rules published by the Department of Finance are the first of two packages of draft legislation aimed at addressing tax benefits of certain hybrid mismatch arrangements that are viewed by the Department of Finance as inappropriate. The proposed rules primarily target hybrid arrangements that give rise to deduction/non-inclusion mismatch situations, and were, to a large extent, based on and aligned with the recommendations summarized in the OECD’s Report on Neutralising the Effects of Hybrid Mismatch Arrangements. Although the public consultation period only ended on Jand Parliament has yet to pass the relevant legislation, the draft legislation provides for the new rules to apply to payments made or deemed to be made on or after July 1, 2022. As currently drafted, there are no grandfathering exceptions for arrangements already in place as of July 1, 2022. The Canadian anti-hybrid rules released in draft on Apare now presumptively applicable to any payments made on or after July 1, 2022. Canadian anti-hybrid rules: presumptively effective as of July 1, 2022

Recent EU tax measures extend to taxpayers the benefit of notional interest deductions on equity while Canada targets certain notional interest deductions as part of its proposed hybrid mismatch rules. Author(s): Oleg Chayka, Matias Milet, Ilana Ludwin

Hybrid loan arrangement æ··åˆ