Arbitration Provision Takes Aim At Competent Authority Deadlock

Copyright 2008, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Tax, July 2008

Where a taxpayer considers that the assessing actions of one of the Contracting States to the Canada-U.S. Income Tax Convention (the Treaty) will result in double taxation, the taxpayer may present its case to the competent authority of the Contracting State of which the taxpayer is a resident. This triggers a process under which the competent authorities of the two states must endeavour to reach a resolution of the issue that is mutually acceptable to both competent authorities. The basic principles that govern this process are set out in Article XXVI – Mutual Agreement Procedure, commonly known as "MAP," and in Article IX. This provision also governs cases submitted for an Advance Pricing Agreement, which the governments undertake as competent authorities.