Canada: Canadian government introduces treaty shopping consultation paper

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Canada: Canadian government introduces treaty shopping consultation paper

miller.jpg

richler.jpg

Edward Miller


Ron Richler

In the March 2013 Canadian Federal Budget, the Minister of Finance announced an intention to consult on possible measures to "protect the integrity of Canada's tax treaties while preserving a business tax environment that is conducive to foreign investment". This protection was seen as necessary in response to the practice of "treaty shopping". On August 12 2013, the Canadian Department of Finance released a consultation paper on treaty shopping. The government stated that it would accept comments until December 13 2013.

The consultation paper defines "treaty shopping" generally as "a situation under which a person who is not entitled to the benefits of a tax treaty uses an intermediary entity that is entitled to such benefits in order to indirectly obtain those benefits".

The consultation paper outlines the government's view on treaty shopping and its attempts to challenge treaty shopping over the years, its limited success in challenging what it considers to be abusive transactions in the courts and statistics it points to as evidence of treaty shopping with respect to Canada. The unintended consequences of treaty shopping are then identified in the consultation paper. The consultation paper goes on to discuss the relative merits of different possible approaches, including either a domestic tax rule or a treaty-based rule, and either a general rule or one or more specific rules. The consultation paper invited comment with reference to seven general questions dealing with the foregoing issues.

While it is too early to anticipate precisely which approach the government is likely to pursue to combat its perceived treaty abuse concerns, it seems clear that the Canadian federal government intends to introduce some kind of new measures in this regard.

Edward Miller (edward.miller@blakes.com) and Ron Richler (ron.richler@blakes.com)

Blake Cassels & Graydon

Tel: +1 416 863 2400

Fax: +1 416 863 2653

Website: www.blakes.com

more across site & shared bottom lb ros

More from across our site

Australia’s conservative opposition will repeal controversial tax agent reporting rules if elected in the country’s May general election
Shapley would be the fourth person to hold the job this year; in other news, UK tax advisory firm MHA raised fewer funds than expected from its London IPO
The US needs to be involved in pillar one for there to be more international acceptance of the project, Michael Masciangelo says
The UK regulator is investigating EY’s auditing of the national postal service as it relates to the high-profile Horizon scandal, which saw hundreds wrongfully convicted
The directive will extend cooperation and information exchange around pillar two, according to the Council of the EU
Audit engagement partner Christopher Voogd has also been hit with a £32,500 charge over the firm’s work with Stirling Water Seafield Finance
China’s largest overhaul of its tax administration system in 24 years, featuring enhanced enforcement powers, is underway, says Abe Zhao of FenXun Partners
However, the US president increased tariffs on imported Chinese goods to 125%; in other news, UK tax firm MHA expects to raise £102m from its London listing
A mere three firms accounted for more than 90% of top-up taxes paid, according to research from Deloitte
Taxpayers with Brazilian operations should revisit their withholding positions in light of updated US guidance, writes Rafael Benevides, senior tax counsel at Meta
Gift this article