The OECD Report on "Hybrid Mismatch Arrangements" recommends that Canada deny Canadian tax benefits from common cross-border financing arrangements with the U.S.

The implementation of the OECD Report on "Hybrid Mismatch Arrangements" by Canada (or the U.S.) would adversely affect common cross-border financing structures.  For example:

• In the likely event that Congress does not adopt the Report's recommendation for the denial of U.S. interest deductions for a repo structure (in which U.S. Finco sells preferred shares, issued by U.S. Opco, to Canadian Parent - viewed as a borrowing by U.S. Opco for U.S. purposes), Canada would be expected to deny the s. 113 deduction on the preferred dividends.
• Where a ULC is financed by a loan from a U.S. affiliate of its U.S. shareholder (so that the interest is recognized for U.S. purposes but eliminated on consolidation), Canada may be expected to deny all interest deductions.
• The Report effectively recommends that Canada deny the interest deduction generated in a tower structure.

Neal Armstrong.   Summary of Abraham Leitner "BEPS Targets Commonly Used Canada-U.S. Hybrid Structures," Tax Notes International, 9 February 2015, p. 531 under Treaties – Art. 11.