Global Tax Adviser
November 22, 2011

Protocol to Canada-Barbados Treaty Signed — Effect in 2013?

Heather O'Hagan
Toronto, International Corporate Tax

Marc Desrosiers
Montreal, International Corporate Tax

Canada and Barbados signed a Protocol to their current income tax treaty on November 8, 2011. Based on discussions with a Finance official, it is almost certain that the Protocol will not be approved by Canada and enter into force in 2011. The Protocol will:

  • Amend the treaty to treat International Business Companies (IBCs) and similar entities as residents of Barbados but will still preclude them from claiming full treaty benefits
  • Create a look-through rule for gains derived from dispositions of investments that derive their value principally from immovable property
  • Deem certain dual resident companies to be resident in their country of incorporation
  • Include the current internationally agreed standard on the exchange of information developed by the Organisation for Economic Co-operation and Development (OECD).  

Entry into force
According to a Finance official, there will not be enough time to complete the steps necessary for Canada to be in a position to ratify the Protocol, including:

  • Tabling the Protocol in the House of Commons for 21 sitting days (the House of Commons adjourns for its holiday recess on December 16)
  • Enacting legislation to implement the Protocol in Canadian law
  • Issuing the Order in Council to authorize Canada’s note of ratification to be sent to Barbados.

If the new Protocol is not ratified until 2012, most of the provisions of the Protocol, including the capital gains article, will not take effect until January 1, 2013.

For more information, contact your KPMG adviser.

 

KPMG Publications

Canadian companies may be interested in these recent publications:

Tax NewsFlash

Global Tax Adviser

Global Tax Adviser

Transfer Pricing Highlights 

Trade Matters

These KPMG publications, among many others, are available at www.kpmg.ca.













 

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