International Tax

Businesses engaged in global operations face a complex web of tax legislation and regulatory requirements. The Osler Tax Group’s expertise in international taxation enables tax planning and structuring that minimizes our clients’ global tax liabilities and enhances their business efficiency. Our lawyers provide clarity and confidence in the international landscape as our clients achieve their global business objectives.

Osler lawyers provide inbound and outbound cross-border tax planning and dispute prevention and resolution advice to both Canadian and global clients from a broad range of sectors. Our strategic, integrated tax structuring reconciles foreign tax laws with Canadian tax planning strategies and ensures compliance with relevant legislation and regulatory requirements. Tax planning includes considerations associated with transfer pricing, the application of tax treaties, international joint ventures, and permanent establishment considerations.

Our lawyers work collaboratively with our clients and their foreign tax advisers to provide efficient expert advice on cross-border transactions of all types, whether mergers and acquisitions, real estate and private equity partnerships, joint ventures, restructurings, project financings, public company stock acquisitions, inbound and outbound securities, and tax-efficient repatriation of profits. Additionally, our lawyers are specialized in the development and implementation of customized tax-efficient international financing arrangements.

Global Tax Reform

Canada continues to work with a variety of international organizations on international tax reform projects, most significantly the OECD/G20 Inclusive Framework on BEPS. A high-level agreement regarding a two-pillar approach to tax reform was reached in 2021, with the expectation at the time that the agreed-upon approach would come into force shortly thereafter.

Pillar One provides a new taxing right for market jurisdictions (where customers are located) to obtain

• a share of residual profit of multinational enterprises (MNEs)
• the calculation of a fixed return for certain baseline and marketing and distribution activities in jurisdictions where an MNE has a physical presence, and
• dispute prevention and resolution mechanisms (referred to by the OECD as Tax Certainty).

In late 2023, the OECD published a brief statement that reiterates the commitment of the Inclusive Framework members to achieve a consensus-based solution for Pillar One and to finalize the multilateral convention (MLC) by March 31, 2024. However, Pillar One cannot come into effect without having been adopted by the United States, which at present appears unlikely that it will enact Pillar One into their domestic law in the near term or at all. While Canada continues to work with other countries on a potential agreement on Pillar One, Canada is also moving forward with an alternative Digital Services Tax as part of Bill C-59 — which is expected to be passed through Parliament soon.

Pillar Two involves an introduction of a 15% global minimum tax on undertaxed income of large MNE groups. The OECD released the global anti-base erosion (GloBE) model rules on December 20, 2021, and the GloBE commentary and examples on March 14, 2022. The OECD has since published other documents relating to Pillar Two. Canada and many other countries have begun implementing Pillar Two. Canada’s version of Pillar Two is the Global Minimum Tax Act — which is included as part of Bill C-69 — and is expected to be passed through Parliament soon.

As Canada and the rest of the world look to reshape the international tax system, there will be many new challenges (and potential planning opportunities) for Canadian businesses and multinational enterprises. The scope and wide range of the recent (and evolving) changes will make for a busy and uncertain time for taxpayers. It will be essential to proactively monitor and seek advice on tax developments, which continue to increase in volume and complexity. Lawyers in Osler’s leading Tax Group are experts on the complexities of international taxation and understand the challenges of a rapidly changing global economy. They offer timely insight into ongoing global tax reform developments and will continue to provide updates on the impact of the various initiatives.