Canada and U.S. Announce Agreement regarding PE
Attribution of Income Principles under Canada-U.S.
By: Jim Wilson and Pierre Alary
The 5th Protocol to the Convention Between Canada and the
United States of America with Respect to Taxes on Income and
Capital (Canada-U.S. Treaty and 5th Protocol), which came into
effect on December 15, 2008, introduced several significant and
highly anticipated changes to the Canada-U.S. Treaty. One
significant change that arose as a consequence of the 5th Protocol
relates to the computation of income attributable to a permanent
establishment (PE), with such change providing, it would appear,
that certain notional expenses are now deductible in computing the
income attributable to a PE under Article VII (Business Profits) of
the Canada-U.S. Treaty. The 5th Protocol amendment supports the
application of the Organisation for Economic Co-operation and
Development (OECD) Transfer Pricing Guidelines, by analogy, for the
purposes of determining the business profits attributable to a PE.
While most of the amendments to the Canada-U.S. Treaty have been
analyzed at length by the tax community, this change relating to
the computation of income attributable to a PE seemed to go quietly
under the radar. However, on June 26, 2012, more than three and a
half years following the coming into force of the 5th Protocol, the
competent authorities of the United States and Canada entered into
an agreement (Competent Authority Agreement) regarding the
application of Article VII of the Canada-U.S. Treaty which provides
that the competent authorities will interpret Article VII of the
Canada-U.S. Treaty in a manner entirely consistent with the full
authorized OECD approach (AOA).
Three-year Statute of Limitation on Refunds of
"Overpayments" for Corporations: Has CRA Opened
By: Jim Wilson, Pierre Alary and Colleen McMullin
The purpose of statutory limitation rules is to introduce some
finality into the law. For a country's taxing authority, a
limitation period may serve the additional purpose of allowing it
to finally "close its books" and ascertain its tax base.
In Canada, subsection 164(1) of the Income Tax Act (ITA)
prevents an overpayment of tax from being refunded beyond three
years from the year in which the taxpayer made the overpayment. The
rules provide the Canada Revenue Agency (CRA) the discretion to
extend this period to up to 10 years, although not for corporate
taxpayers. Recent amendments to the ITA, namely the addition of
paragraph 164(1.5)(c), as well as a recent CRA technical
interpretation on the interaction between subsection 221.2(1)
(dealing with the re-appropriation of debts) and subsection 164(1)
have caused tax advisers to question the "three-year
limitation" adage. In addition, certain tax treaty provisions,
such as the Mutual Agreement Procedure (MAP) Article of the
Convention Between Canada and the United States of America with
Respect to Taxes on Income and Capital (Canada-U.S. Treaty),
operate to further blur the rule. Many tax professionals are left
wondering: has the three-year statutory limitation on refunds of
overpayments for corporations, for all intents and purposes, become
merely an unnecessary hurdle in the ITA?
The prospect of an internal investigation raises many thorny issues. This presentation will canvass some of the potential triggering events, and discuss how to structure an investigation, retain forensic assistance and manage the inevitable ethical issues that will arise.
From the boardroom to the shop floor, effective organizations recognize the value of having a diverse workplace. This presentation will explore effective strategies to promote diversity, defeat bias and encourage a broader community outlook.
Staying local but going global presents its challenges. Gowling WLG lawyers offer an international roundtable on doing business in the U.K., France, Germany, China and Russia. This three-hour session will videoconference in lawyers from around the world to discuss business and intellectual property hurdles.
The CRA provides new housing rebates for individuals who have purchased or built a new house or have substantially renovated a house or made a major addition to a house who plan on living in it personally or letting a relative live there.
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