Canada's treaties - Article 3

Article 3 of the treaty is normally the article that deals with general definitions for the treaty.

It normally includes the definition of the country. This includes the geographical area that is covered. Canada normally will include the sea and air space as well as the continental shelf. Other countries, such as Armenia, will define the geography to include internal waters.

It is important to check the definition of person in the treaty - while it will always include individuals, you need to check which other organizations are included.

This paragraph also usually includes a definition of the competent authority. The competent authority is the government body that you need to contact to resolve a treaty conflict such as both countries considering you to be resident in their country (see more on this next week).

Canada's treaties - Article 2

Article 2 of the treaties deals with what taxes will be covered under the treaty. In Canada, this usually refers only to the Income Tax Act. So that means that GST, excise tax and provincial taxes are not covered.

What taxes are covered in the other jurisdiction depend on the wording of this article. For instance in for Argentina, the taxes covered under the treaty include the income tax, the assets tax, and the personal assets tax.

Many treaties also include a paragraph in this article to include taxes imposed in each country that are identical or substantially similar if they are created after the date of the treaty. This allows countries to change legislation without immediately having to go back and negotiate treaties.

Canada's treaties - Article 1

The first article of the treaty identifies who can take advantage of the treaty.

A tax treaty between two countries doesn't increase tax but determines who is permitted to reduce double taxation under the treaty.

For instance, Canada's treaty with the People's Democratic Republic of Algeria is very straightforward - it applies to persons who are resident of one or both countries.

If something (such as a resident) is not defined, or fully defined, in the treaty, the Income Tax Conventions Interpretation Act requires that it be defined by the Income Tax Act.  So, whether or not you are resident of Canada for income tax is the issue - not whether or not you are a citizen or landed immigrant.

Read an E-book week

This week is read an e-book week.  As part of the promotion for this week, my book "Who Gets My Tax Dollars" can be purchased at half-price.  Follow this link for the Smashwords page.