Published by the Tax Group
McCarthy Tétrault FRANÇAIS VOL.3,
Tax Update (Volume 3, Issue 4)

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 OECD 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.


Bad News for Aggressive Taxpayers: Canada Revenue Agency Wins Another GAAR Case
On December 16, 2011, the Supreme Court of Canada released its decision in Copthorne Holdings Ltd. unanimously dismissing the taxpayer’s appeal. The following article was the subject of an e-Alert published on December 19. This decision will be of particular interest internationally as it involved a challenge to tax planning by a non-resident of Canada to repatriate funds from Canada on a basis free from Canadian tax. 

Payments to Non-Resident Financial Intermediaries — Update on Canadian Withholding Tax Obligations
The Canada Revenue Agency has amended its administrative position on Canadian withholding tax obligations on payments of interest, dividends, royalties, etc., to non-residents to be effective on January 1, 2012 (now extended to January 1, 2013). As previously discussed in New Developments in Canadian Withholding Tax Obligations — New Forms Signal the End of the "Address Rule", the new guidelines impose greater due diligence and reporting duties on persons paying amounts to non-resident beneficial owners of Canadian securities (debt, equity and trust securities), particularly where the non-resident wishes to claim treaty benefits that reduce the rate of withholding.

End of the "Address Rule" for Determining Withholding on Payments to Non-Residents — Extension of Transitional Period Announced
The Canada Revenue Agency has announced that it is extending the transitional period from December 31, 2011 until December 31, 2012 to allow payers to gather additional information about payees and to perform procedural changes and system upgrades that may be required to react to the increase in information.