Canada - English

Canada Signs TIEAs with the British Virgin Islands and Brunei 

Global Tax Adviser

 

May 28, 2013

 

Brian Mustard and Raphael Barchichat
Montreal, International Corporate Tax

 

Candace Sears
Fredericton, Canadian Corporate Tax

 

Finance has announced that Canada recently signed new Tax Information Exchange Agreements (TIEA) with the British Virgin Islands and Brunei on May 21 and May 9, 2013, respectively. Based on the OECD's internationally agreed standard, a TIEA sets out a framework for exchanging information between countries to assist in the administration and enforcement of tax laws.

Entry into force
Canada's TIEA with the British Virgin Islands will enter into force on the date that both countries have notified the other that they have ratified the agreement. The TIEA will apply to taxable periods beginning on or after that date (under Article 13 of the TIEA).

Canada's TIEA with Brunei will enter into force 30 days after both countries have notified the other that they have ratified the agreement. The TIEA will apply to taxable periods beginning on or after that date (under Article 12 of the TIEA).

 

Background
Generally, a signed TIEA comes into force once it has been ratified by both countries, however the ratification process can be lengthy. To come into force, a signed TIEA must first be tabled in the House of Commons. Then, after it is ratified by the Department of Foreign Affairs and International Trade, notification is sent to the other country or countries involved.

 

KPMG observations
In the 2007 federal budget, the government announced that it would increase the incentive for countries to enter into TIEAs with Canada by taxing income earned by foreign affiliates in non-TIEA, non-treaty countries as foreign accrual property income (FAPI). In the case of TIEA negotiations that begin after March 19, 2007, this treatment applies if those negotiations are not successfully completed after the passage of five years from the earlier of the commencement of TIEA negotiations and the date on which Canada proposed the negotiations. In the case of a country that was already in the process of negotiating a TIEA with Canada in 2007, this treatment will apply if the negotiations are not successfully completed before 2014.

 

For more information, contact your KPMG adviser.

 

 

 

 

Information is current to May 28, 2013. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

KPMG Publications

Canadian multinational companies may be interested in these recent publications: