The response to the new U.S. anti-hybrid Regs. may not generate much revenue to the IRS
Code s. 267A and the regulations thereunder target deduction/non-inclusion situations. All of the common structures used by Canadian (and other non-U.S.) multinationals with U.S. operations have been adversely affected. What come to mind are cross-border repo financing structures, tower structures, Lux Fincos with MRPS, and branch mismatch structures.
Some taxpayers are exploring clever technical changes to their existing hybrid structures, notwithstanding that this approach may bump up against the PPT antiavoidance rule in the proposed Regulations. Others may throw in the towel.
[O]ther MNEs based in Canada (and elsewhere) might opt for a third approach that relies on simpler, non-hybrid, third-country financing structures. Some countries that have tax treaties with the United States — for example, Bulgaria, Hungary, Ireland, and Switzerland — have been carefully preparing for a post-BEPS world and offer very competitive corporate tax rates around 10 percent that may bring in business. Trading a 21 percent rate for a 10 percent rate is likely to be an attractive option for many tax managers.
Neal Armstrong. Summaries of Nathan Boidman and Michael N. Kandev, “Expected Adverse Effects of Proposed U.S. Anti-Hybrid Regulations on Inbound Financing by Canadian MNEs,” Tax Notes International, February 11, 2019, p. 623 under s. 95(2)(a)(ii)(B)(II) and s. 113(1)(a).