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April 29, 2022 – Ottawa, Ontario – Department of Finance Canada

Today, the Department of Finance released draft legislative proposals that would address hybrid mismatch arrangements, which are used primarily by multinational enterprises to avoid paying their fair share of tax, as committed to in Budget 2021.

Hybrid mismatch arrangements are cross-border tax avoidance arrangements that exploit differences in the income tax treatment of business entities or financial instruments between two or more countries. These mismatches can result in “double non-taxation”, which occurs when income is not subject to tax in any jurisdiction. This can significantly reduce overall tax paid and decrease tax revenues.

These schemes erode the tax base that supports programs and services for Canadians, and provide an unfair advantage to multinational enterprises over Canadian businesses, particularly small and medium-sized businesses.

To address this, the draft legislative proposals are intended to implement, and be generally consistent with, the recommendations in the Action 2 Report of the Organization for Economic Cooperation and Development (OECD)/G20 Base Erosion and Profit Shifting (BEPS) project, on “Neutralizing the Effects of Hybrid Mismatch Arrangements”, with appropriate adaptations to the Canadian income tax context. These proposals will level the playing field and help ensure that multinational corporations pay their fair share.

Canadians are invited to provide feedback on these draft proposals by sending their comments to by June 30, 2022.

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