This article deals with two recent developments which will dramatically reduce the circumstances in which Canada will levy withholding tax on payments of interest made to non-residents. Canada and the United States have agreed to modify the 1980 treaty between them, such that source country taxation on cross-border interest payments will be subject to a three-year phase-in for related-party interest. Concurrently, the government has announced proposed amendments to the Income Tax Act that would eliminate non-resident withholding tax on arm's length interest paid or credited by residents to all non-residents.