Canada-Barbados Tax Treaty - New Protocol

On November 8, 2011, a new protocol (Protocol) amending the Canada-Barbados Income Tax Agreement (Treaty) was signed by the two countries, updating the Treaty to conform with current tax treaties and to reflect Canada's commitment to promote exchange of tax information in accordance with OECD¹ standards. Assuming the Protocol is ratified by each country in 2012, as expected, most of its provisions will be effective January 1, 2013, subject to specific coming into force provisions.

This update highlights certain of the proposed changes to the Treaty.

International Business Companies and Similar Entities

International Business Companies (IBCs) and certain other Barbados entities with special tax benefits² are completely excluded from the Treaty,³ such that they are not currently entitled to any of the benefits of the Treaty. Recent Canadian cases confirmed that the five year limitation period in Articles XI(3) and XXVII(3) of the Treaty for reassessments by