Canada: Hot Off The Presses: Canada Signs The Multilateral Instrument

At the April 2017 International Tax Conference of the International Fiscal Association Canada, a representative of the Department of Finance (Finance) expressed that it was Canada's goal to be ready to participate in the official signing ceremony for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the "MLI"), on June 7, 2017, in Paris.  The government of Canada achieved this goal and signed the MLI at the signing ceremony.  As part of the signing process Canada has also released its preliminary MLI position in respect of the scope of adoption and reservations to the MLI; its definitive position for each jurisdiction must be provided upon the deposit of its instrument of ratification. Read our recent detailed note on the next steps to implementation of the MLI here

Canada has taken a very conservative approach to the MLI, choosing only to adopt the minimum standards with respect to treaty abuse – the new tax treaty preamble and the substantive anti-treaty shopping technical rule – and the mandatory binding arbitration provision (similar to that found in the Canada-US Income Tax Convention (1980)).1

In a twist on what had generally been expected, in the context of the anti-treaty shopping rule, Canada will adopt the "principal purpose test" (PPT) but has specified that this rule should serve as an interim measure seeking, over the long term, to negotiate, on a bilateral basis with its treaty partners, detailed limitation on benefits provisions.  The PPT generally provides that treaty benefits will be denied when one of the principal purposes of an arrangement is to obtain a treaty benefit in a way that is not in accordance with the purpose of the relevant treaty provisions.  The PPT has been criticized for causing uncertainty as to what constitutes one of the "principal purposes" of a transaction or arrangement.  There is also the difficulty of interpreting what is the purpose of a given treaty provision, although the new tax treaty preamble language provided in the MLI may assist to some extent.

On a preliminary basis, Canada has registered reservations on all other provisions in the MLI.  This result was foreshadowed by a concern expressed by Finance at the April IFA meeting and repeated again in the Backgrounder to the MLI signing (issued by Finance on June 7, 2017) that "[a] country may expand the scope of its commitment under the Multilateral Convention by withdrawing or limiting a reservation, but it cannot subsequently narrow its commitment by adding or broadening a reservation at a later date".  As stated in the Backgrounder, Finance is of the opinion that in certain circumstances, bilateral treaty updates may be preferable, and it has announced, also on June 7th, that it will begin treaty negotiations with Germany and Switzerland.

Canada has listed as Covered Tax Agreements (CTAs) almost all of the countries that were members of the ad hoc group that developed the MLI and that have a bilateral tax treaty with Canada.  As expected, the United States is missing from the CTA listing.  Also missing, due to the announced treaty negotiations, are Germany and Switzerland. On the other hand, Ireland, Luxembourg and the Netherlands have signed the MLI.

Below is a table showing all of Canada's CTAs, whether or not the other country has also listed its treaty with Canada as a CTA and each party's choice with respect to the treaty-abuse substantive minimum standard. Certain signatories have opted for the simplified limitation on benefits (S-LOB) test to apply in the place of the PPT. As Canada has not accepted a bilateral or unilateral application of the S-LOB in such cases, the PPT alone will nevertheless apply to all of Canada CTAs.  Also included in the chart below are the articles of CTA that will be replaced by the PPT language in the MLI.  We note a number of other countries have also expressed an intention to adopt detailed limitation on benefits rules through bilateral negotiations. It will be interesting to see whether this common intention will kick-start further treaty negotiations for Canada.

As the ratification process proceeds and Canada's MLI position in respect of the scope of adoption and reservations to the MLI is finalized, it will be interesting to see whether Finance changes its approach and opts in to other provisions of the MLI as was done by some of Canada's important treaty partners, including France.

MLI

Signatories

Canada has named as CTA

Other Signatory has named Canada as CTA

Principal purpose test (PPT) including articles of CTAs replaced by art 7(1) MLI

Limitation on Benefits (LOB)[2] – Canada has not accepted unilateral application, only PPT applies

Indicated Intention to Negotiate Bilateral LOB

Andorra

 

 

 

 

 

Argentina

 

 

Armenia

 

 

 

 

 

Australia

 

 

Austria

 

 

Belgium

 

 

Bulgaria

 

 

 

 

 

Burkina Faso

 

 

 

 

 

Chile

Art. 11(7), 12(7)

China

 

 

Colombia

Art. 26(1)

Costa Rica

 

 

 

 

 

Croatia

 

 

Cyprus

 

 

Czech Republic

 

 

Denmark

 

 

Egypt

 

 

Fiji

 

 

 

 

 

Finland

 

 

France

 

 

Gabon

 

 

Georgia

 

 

 

 

 

Germany

 

 

 

 

 

Greece

 

 

Guernsey

 

 

 

 

 

Hong Kong

Art. 10(7), 11(9), 12(7)

 

 

Hungary

 

 

Iceland

 

 

India

 

 

Indonesia

 

 

Ireland

 

 

Isle of Man

 

 

 

 

 

Israel

Art. 10(10), 11(10), 12(8), 13(7) have not been confirmed by Israel

 

 

Italy

 

 

Japan

 

 

Jersey

 

 

 

 

 

Korea

 

 

Kuwait

 

 

 

 

 

Latvia

Art. 28(3) has not been confirmed by Latvia

 

 

Liechtenstein

 

 

 

 

 

Lithuania

Art. 28(3)

 

 

Luxembourg

 

 

Malta

 

 

Mexico

Art. 10(7), 11(8), 12(10)

 

Monaco

 

 

 

 

 

Netherlands

 

 

New Zealand

Art. 10(9), 11(10), 12(7)

 

 

Norway

*Norway's MLI Position at the time of signature will be made available as soon as Norway has submitted the Convention to its Parliament in line with the required procedures in Norway

 

 

 

 

 

Pakistan

 

 

Poland

Art. 10(6), 11(8), 12(8)

 

Portugal

 

 

Romania

 

 

Russia

 

 

San Marino

 

 

 

 

 

Senegal

 

Serbia

 

 

Seychelles

 

 

 

 

 

Singapore

 

 

Slovak Republic

 

 

Slovenia

 

 

South Africa

 

 

Spain

 

 

Sweden

 

 

Switzerland

 

 

 

 

 

Turkey

 

 

United Kingdom

10(8), 11(9), 12(8)

 

 

Uruguay

 

 

 

 

 

Footnotes

1. A detailed discussion of the mutual agreement procedures and a comparison of the positions of the signatories with respect to such procedures are beyond the scope of this article.

2. Pursuant to Article 7(17)(c) of the Convention, the signatory chose to apply the Simplified Limitation on Benefits Provision pursuant to Article 7(6).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
14 Sep 2017, Seminar, Birmingham, UK

Has Cloud replaced traditional outsourcing models? We will compare cloud to outsourcing, consider whether they have effectively become the same thing for many solutions and assess some of the advantages and disadvantages of each model.

18 Sep 2017, Seminar, London, UK

Our annual event as part of the London Design Festival is now in its fifth year. We would be delighted if you are able to join us again.

21 Sep 2017, Seminar, London, UK

Has Cloud replaced traditional outsourcing models? We will compare cloud to outsourcing, consider whether they have effectively become the same thing for many solutions and assess some of the advantages and disadvantages of each model.

 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.