Bennett Jones Speaks before Senate Committee on Tax Issues for Energy Investments

Bennett Jones LLP

Bennett Jones LLP

On May 29, 2019, Darcy Moch, Greg Johnson and Jared Mackey of Bennett Jones participated on a witness panel before the Standing Senate Committee on Foreign Affairs and International Trade to discuss the application of Bill C-82 and its implications for current and future investments in Canadian energy.

The enactment of Bill C-82 will ratify the OECD's "Multilateral Convention to Implement Tax Treaty related measures to prevent Base Erosion and Profit shifting" (the "MLI") into Canadian law. As discussed in our prior Bennett Jones update, the MLI will affect multinational enterprises and private equity firms investing in the Canadian resource sector by imposing a broad anti-avoidance rule which could disallow treaty benefits for investments held through common tax-efficient holding structures.

Bill C-82 has been adopted by the House of Commons and has passed second reading in the Senate of Canada. Before the Senate Committee, Bennett Jones offered suggestions to improve foreign investment opportunities in Canadian energy and cautioned against the implementation of the MLI without appropriate transitional provisions. A copy of our complete opening remarks to the Senate Committee is available here.

We anticipate that the Senate Committee will soon complete its review and return the Bill to the Senate for third reading. Following passage of the Bill through the Senate, Bill-82 must then receive Royal Asset. The Government has stated its intention to enact the Bill by June 21, 2019, prior to the summer recess. An Order in Council will be required to notify the OECD that Canada has completed its ratification procedures. Assuming notification to the OECD in June 2019, the MLI would become effective for Canada's treaty partners that have also ratified the MLI on January 1, 2020, for withholding taxes and for tax years beginning after April 1, 2020, for other taxes, including capital gains. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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