July 10, 2008 signalled the release of the Technical Explanation of the Fifth Protocol to the Canada- US Income Tax Convention, 1980 (the Convention), concurrent with the hearing on that date of the US Senate Committee on Foreign Relations on pending income tax treaties with Canada, Iceland and Bulgaria.

The Fifth Protocol was signed by Canada and the US on September 21, 2007 and was ratified by Canada on December 14, 2007 when Bill S-2 received Royal Assent.

The Technical Explanation is a document prepared by the US Treasury Department as part of the US ratification process. Canada's Minister of Finance, yesterday issued a News Release stating that "While it is not customary for Canada to issue such an explanation, Canada was given an opportunity to review and comment on the U.S. document. ....Canada agrees that the Technical Explanation accurately reflects understandings reached in the course of negotiations with respect to the interpretation and application of the various provisions of the [Fifth] Protocol."

The Technical Explanation attempts to address a number of issues raised by taxpayers and their professional advisers in the period since the Protocol was signed last year, notably the effective dates of the interest withholding provisions which have been eagerly anticipated by those involved in cross border lending activities. The document does not provide the hoped for resolution of the issues raised by many tax professionals and commented on in a submission of the New York State Bar Association Tax Section on January 29, 2008 in the relation to the interpretation and application of the controversial anti hybrid rules.

For a copy of the Technical Explanation please go to http://www.ustreas.gov/press/releases/reports/tecanada08.pdf

For a copy of the News Release issued by Canada's minister of Finance go to http://www.fin.gc.ca/news08/08-052e.html

For a copy of the comment on the Fifth Protocol prepared by the US Joint Committee on Taxation go to www.jct.gov

For a copy of the testimony of Treasury Deputy Assistant Secretary for International Tax Affairs Michael F. Mundaca before the US Senate Committee on Foreign Relations go to http://www.treas.gov/press/releases/hp1076.htm