Canada: Canada Signs Its First Tax Information Exchange Agreement

Copyright 2009, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Tax, September 2009

On August 29, 2009, Canada signed its first tax information exchange agreement (TIEA) with the Netherlands in respect of the Netherlands Antilles (which is specifically not covered by the tax convention between Canada and the Netherlands) (the Netherlands Antilles TIEA). A TIEA is a bilateral agreement wherein two countries agree to exchange information relevant to the administration and enforcement of their domestic tax laws. The 2007 Canadian federal budget (2007 Budget) introduced tax benefits, discussed below, for dividend payments from corporations resident in countries that do not have a tax convention with Canada but sign a TIEA with Canada. The Netherlands Antilles TIEA is based on a model agreement produced by the Organization for Economic Cooperation and Development (OECD Model Agreement).

The Netherlands Antilles TIEA will require a country which receives a request from the other country for information "foreseeably" relevant to the administration and enforcement of the other country's tax law to provide that information. It appears that "foreseeably" is intended to be given a broad interpretation but not to include "fishing expeditions". If the information requested is not in the possession of the requested authorities, they must use such legal means as may be available to them to obtain the information; however, they are not required to provide information that is not in their possession or in the possession or control of persons within their jurisdiction. The circumstances in which a requested country can decline to collect the requested information are limited, and include:

1. The requesting country would not be entitled to obtain the information under its domestic law;

2. The requested information is subject to solicitor-client privilege under the law of the requested country; and

3. Secret or trade processes.

Under circumstance 1 above, it is the law of the requesting country – not that of the requested country – that is the standard to be used by the requested country in refusing a request for information. In this regard, bank privacy laws and laws applicable to agents and trustees in the requested country may be overridden. Canada and the Netherlands agree to enact legislation to give effect to the terms of the Netherlands Antilles TIEA.

The Netherlands Antilles TIEA closely follows the OECD Model Agreement with little significant variation. It will enter into force on the first day of the third month after each party has notified the other in writing that the internal procedures required by that country for the entry into force of the TIEA have been complied with. The agreement is retroactive with respect to matters involving criminal charges. With respect to all other matters, it applies only in respect of taxable periods beginning on or after the date it comes into force, or where there is no taxable period (such as withholding taxes), with respect to all charges to tax arising on or after that date.

The Netherlands Antilles TIEA may affect the taxation of dividends received by a Canadian corporation from a foreign affiliate (FA) resident in the Netherlands Antilles. Prior to 2008, active business income earned by FAs resident in jurisdictions with which Canada did not have a tax convention was subject to Canadian tax upon repatriation with a credit for any tax paid in the other jurisdiction. The 2007 Budget amended these rules such that dividends paid from active business income of an FA resident in a jurisdiction with which Canada has a TIEA will be considered exempt surplus and not be subject to tax in Canada when paid to its Canadian corporate shareholder. As a result, dividends paid by an FA resident in the Netherlands Antilles from active business income earned in the Netherlands Antilles to Canadian corporate shareholders will no longer be subject to Canadian tax. This change will apply to income earned by an FA resident in the Netherlands Antilles effective on the first day of the FA's taxation year that includes the day the Netherlands Antilles TIEA enters into force.

The 2007 Budget also introduced a penalizing provision which will deem business income earned by a controlled FA at a particular time to be subject to tax in Canada on an accrual basis where the controlled FA is resident in a jurisdiction with which:

1. Canada does not have a tax convention;

2. Canada does not have a TIEA; and

3. Canada has, more than 60 months before the particular time, either begun or sought to begin negotiations for a TIEA.

However, this rule will not apply before 2014 to jurisdictions with which Canada was, on March 19, 2007, in the course of negotiating a TIEA. This rule is intended to encourage jurisdictions with which Canada had no tax convention to enter into a TIEA with Canada.

Canada has also recently announced that it is currently in TIEA negotiations with the following jurisdictions: Anguilla, Aruba, Bahamas, Bahrain, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Guernsey, Isle of Man, Jersey, Saint Kitts and Nevis, Saint Lucia and Turks and Caicos Islands. Negotiations with the British Virgin Islands, the Isle of Man and Jersey commenced in 2005. However, due to the fact that Canada was negotiating a TIEA with these jurisdictions on March 19, 2007, the new penalizing rule will not apply to them until 2014, if ever. Negotiations with the remaining jurisdictions commenced in 2009. It is expected that the TIEAs with these jurisdictions will follow the OECD Model Agreement.

If Canada concludes a TIEA with any of the jurisdictions listed above, then Canadian corporations may want to consider whether such jurisdiction could be used in structuring offshore investments. Generally, the aforementioned jurisdictions have very low domestic tax rates and no withholding taxes. An FA resident in such jurisdiction could be used to earned active business income or to earn investment income that is deemed to be active business income. Potentially offsetting the advantage of low tax rates is the fact that many of the jurisdictions have a limited tax convention network.

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

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

Events from this Firm
27 Oct 2016, Seminar, Toronto, Canada

Please join members of the Blakes Commercial Real Estate group as they discuss five key provisions of a commercial real estate purchase agreement that are often the subject of much negotiation but are sometimes misunderstood.

1 Nov 2016, Seminar, Toronto, Canada

What is the emotional culture of your organization?

Every organization and workplace has an emotional culture that can have an impact on everything from employee performance to customer or client satisfaction.

3 Nov 2016, Seminar, Toronto, Canada

Join leading lawyers from the Blakes Pensions, Benefits & Executive Compensation group as they discuss recent updates and legal developments in pension and employee benefits law as well as strategies to identify and minimize common risks.

In association with
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (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

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’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.


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.


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 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.


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.


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.


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.


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

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

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

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