Neil Chander, partner, international tax at RSM Canada LLP, sat down for a video interview at Nareit's REITwise: 2025 Law, Accounting & Finance Conference® in San Antonio, Texas.
Chander discussed key cross-border tax issues for U.S. REITs investing in Canada. He identified three primary challenges: the complexity of Canadian tax law—especially regarding repatriation of profits, Canada’s strict interest limitation rules that lack exemptions for real estate, and the uncertainty created by the OECD’s Pillar Two global minimum tax, which Canada has implemented but the U.S. has not.
To address these challenges, Chander emphasized the importance of careful planning and structuring. He advised U.S. REITs to stay informed, avoid making hasty decisions amid policy changes, and use modeling to evaluate potential scenarios and outcomes.
Proper structuring depends on several variables, including asset class, joint venture tax status, investment duration, and income expectations. Tools like foreign tax credits, treaty benefits, and different entity structures (e.g., partnerships or trusts) can help optimize tax positions.
Chander also highlighted compliance burdens, notably the withholding tax requirements when disposing of Canadian real estate. Non-residents face a 25% withholding on gross proceeds unless they obtain a clearance certificate, often a year-long process. This can deter investment and create cash flow issues.
While he acknowledged the complexities, Chander expressed optimism that with ongoing policy improvements and strategic planning, these challenges can be effectively managed.