Budget 2026: Canada Expands Its Tax Treaty Network

Budget 2026[1] confirms that Canada continues negotiating new tax treaties with Qatar and the Kingdom of Saudi Arabia and seeking to modernize its existing tax treaty with Australia. The federal Government has signalled its intention to continue expanding Canada's tax treaty network and enhancing Canada's attractiveness as a destination for foreign investment, including capital from pension funds and sovereign wealth funds.

The modernization of Canada's tax treaty with Australia will aim to increase two-way investments in "nation-building projects" between the two countries. In March 2026, a memorandum of understanding ("MoU") was concluded under the Canadian-Australian Pension Funds Investment Initiative between major Canadian and Australian pension and superannuation funds. The MoU sets out a plan for enhancing cross-border, long-term pension fund investment and addressing barriers that restrict the flow of patient capital into infrastructure and other long-duration assets in Canada and Australia.[2]

In January 2026, Prime Minister Carney visited Qatar, during which both sides agreed to commence negotiations on a tax treaty and to conclude negotiations on a Foreign Investment Promotion and Protection Agreement ("FIPA"). The FIPA is expected to provide Canadian companies with greater legal certainty and make it easier to operate in Qatar, while also positioning Canada more favourably to attract investment from Qatar.[3] In July 2026, Canada and Saudi Arabia similarly agreed to start negotiating a tax treaty and welcomed ongoing FIPA negotiations with a view to concluding them by early 2027.[4]

These developments are notable given the scale of investment capital available in the region. Qatar and Saudi Arabia are home to some of the world's largest sovereign wealth funds, with assets estimated at approximately US$600 billion and more than US$900 billion, respectively.

[1] Budget 2026: Masters of our Destiny (November 5, 2026).
[2] Prime Minister of Australia, "Australia-Canada Joint Statement"; Prime Minister of Canada, "Prime Minister Carney elevates partnership with Australia in critical minerals, defence, and artificial intelligence"; CCP Investments, "CPP Investments Enters CAP Invest Initiative Memorandum of Understanding".
[3] Prime Minister of Canada, "Prime Minister Mark Carney of Canada and Amir of Qatar His Highness Sheikh Tamim bin Hamad Al Thani commit to deepening bilateral engagement and economic cooperation"; Prime Minister of Canada, "Prime Minister Carney secures new partnership with Qatar to increase trade, investment, and defence cooperation".
[4] Prime Minister of Canada, "Prime Minister of Canada Mark Carney and the Crown Prince and Prime Minister of Saudi Arabia, His Royal Highness Mohammed bin Salman commit to deepening bilateral engagement and economic cooperation"; Prime Minister of Canada, "Prime Minister Carney deepens partnership with Saudi Arabia across trade, education, technology, and critical minerals".

by Victor Ulitin

A Cautionary Note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2026