Canadian Tax @ Gowlings - May 3, 2011

Edited by Jim Wilson

Article XIII(8) of the Canada-U.S. Treaty – Not a Simple Rollover Provision

The purpose of this article is to provide an update on current developments at the Canadian Competent Authority regarding Article XIII(8) of the Canada-United States Tax Convention (1980)¹ ("Convention") and similar provisions found in other Canadian tax treaties.² It is generally well understood that the primary purpose of an income tax treaty is to avoid double taxation. One common cause of juridical double taxation is where there are timing differences between the income recognition tax laws of two Contracting States. The OECD Model Tax Convention on Income and on Capital³ (the "OECD Model") addresses these timing mismatches by attempting to put some obligation on Resident States to rectify the double tax by providing relief regardless of when the tax is levied by the Source State.⁴ The OECD Model does not, however, require either a Resident State or a Source