Canada - Proposal to prevent “treaty shopping” 

February 21: Foreign-based multinationals and foreign corporations investing in or through Canada will want to monitor developments of the 2014 federal budget’s proposed rule to prevent “treaty shopping.”

In the budget, Canada’s Department of Finance proposed a broad, main purpose domestic rule (rather than a more specific treaty-based approach) to deal with the perceived abuse of Canada’s tax treaties. Finance is accepting comments on these proposals until 11 April 2014.


Finance considers treaty shopping to be an abuse in which a non-resident of Canada (who is not entitled to the benefits of a particular tax treaty with Canada) obtains the benefits of one of Canada’s bilateral treaties by indirectly using an entity resident in another country with which Canada has concluded a tax treaty to earn income through Canada.


According to Finance, these treaty shopping practices provide indirect and unintended tax benefits to residents of third countries.


Read a February 2014 report prepared by the KPMG member firm in Canada: Canada Proposes Broad Domestic Rule to Curtail Treaty Shopping




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