Ottawa, August 12, 2013
Government Invites Comments on Possible Measures to Prevent Treaty Shopping
As announced in Economic Action Plan 2013, the Government is inviting comments with respect to possible measures to prevent a type of abuse of Canada’s income tax treaties commonly referred to as “treaty shopping.” Treaty shopping generally arises when a non-resident who is not entitled to the benefits of a tax treaty with Canada seeks to obtain tax treaty benefits by using an entity resident in a country with which Canada has concluded a tax treaty to earn, through that entity, income in Canada.
When treaty shopping occurs, tax treaties concluded between Canada and its treaty partners provide indirect and unintended tax benefits to residents of third countries. While Canada is prepared to reduce the level of Canadian tax imposed on residents of trading partners by concluding bilateral tax treaties, it is not prepared to extend these tax treaty benefits to third-country residents who indirectly access these benefits by treaty shopping. Adopting measures that prevent treaty shopping, as some other countries have done, would protect the integrity of Canada’s tax treaties. Canada has comprehensive tax treaties in place with 90 countries—one of the largest networks of bilateral tax treaties in the world.
The Government is committed to enhancing the integrity of the tax system to ensure that everyone pays their fair share of taxes. Such actions help keep taxes low for Canadian families and businesses, thereby improving incentives to work, save and invest in Canada. The purpose of this consultation is to seek the views of stakeholders on possible approaches to developing a workable solution to treaty shopping. Comments received in the course of the consultation will help the Government determine what measures could be implemented to address treaty shopping while preserving a competitive business tax system.
Comments on the attached consultation document can be submitted to the Department of Finance at Treaty.Shopping-Chalandage.Fiscal@fin.gc.ca or at the address below. The closing date for comments is December 13, 2013.
Tax Legislation Division
Tax Policy Branch
Department of Finance
140 O’Connor Street
For further information, media may contact:
Department of Finance