Canada’s International Tax System

The international aspects of the Canadian income tax system are incredibly complex from the perspective Another important factor with respect to Canadian of tax policy and legislation, and are crucial to the taxation of both residents and non-residents is the functioning of the income tax system as a whole. [...] Foreign source would be subject to withholding tax if received income is often subject to foreign tax, and the by the non-residents directly, are instead subject international consensus is that the source country’s to ordinary Canadian tax on the net income of the tax has priority over the residence country’s tax. [...] These exemption from source-country tax on interest norms are reflected in the fundamental aspects paid to a resident of the other state, even where of developed countries’ tax systems, in the OECD the payments are made to a related party.11 This and United Nations Model Conventions,13 and is the only Canadian treaty, but not the only US increasingly, in the soft-law guidance issued by the treaty, [...] Nevertheless, the and include consensus on several basic concepts: potential problem of provinces imposing income taxes contrary to the provisions of Canada’s tax → countries are limited to taxing on the treaties has been largely resolved by the provinces basis of the residence of taxpayers or (except Ontario) adopting unilateral tax reductions the geographical source of income; and exemptions to [...] Nevertheless, and counter to all expectations, the Harmful Tax Competition project suffered a humiliating defeat at the hands of an unlikely coalition: the then-new US Bush administration concerned about a loss The Future of sovereignty, tax havens (predictably), the Black Caucus of the US House of Representatives (less Predicting the future of Canada’s international tax predictably) and some righ