The new tax-sharing agreement has created a “dilemma,” says Carol Dai, an accountant and investment tax planning expert in Toronto. This Agreement shall not affect the tax privileges of diplomatic representatives or consular agents in accordance with the general rules of international law or the provisions of special agreements. (d) if he is a national of both or both States Parties, the matter shall be decided by mutual agreement of the competent authorities of the States Parties. The use of the concept of “resident of a Contracting Party”, unlike “residents of a Contracting State”, should not have a negative impact on the application of Canadian regulations to foreign affiliates. For example, Canada`s foreign subsidiary rules provide that income from the active activities of the foreign subsidiary of a Canadian corporation that is considered a tax-exempt surplus may be distributed to the Canadian corporation as a dividend without Canadian taxes if the foreign subsidiary is located in a country with which Canada has a tax treaty or tax information exchange agreement (TIEA). Act 5907(11) of Canada`s Tax Act is drafted in such a way that a designated contracting country with which Canada has entered into a comprehensive agreement or agreement to eliminate double taxation includes “a sovereign state or other jurisdiction.” Therefore, the fact that Hong Kong is not a sovereign state as such should not affect the tax-free repatriation of dividends from exempt surpluses of a foreign subsidiary of Hong Kong. However, the language of Regulation 5907 (11.2)1 is somewhat ambiguous, given that Hong Kong is a “jurisdiction” and not a “country”, and that the credit rating agency may ultimately be asked to provide some clarification as to the interpretation of this provision. Canada has more than 50 social security conventions. The main objectives of this Convention are as follows: 4. The provisions of the Convention shall not be interpreted in such a way as to limit in any way the tax advantages granted in a State Party by the laws of that State Party or by a convention between the Governments of the States Parties. However, Canada has entered into numerous tax treaties that provide that a natural person cannot be taxed in the two countries that are parties to the agreement. Article 4 of the Canada-China Income Tax Convention provides that a natural person may be resident for tax purposes only in China or Canada. 3.
Where a person other than a natural person resides in both States Parties pursuant to paragraph 1 below, the competent authorities of the States Parties shall endeavour by mutual agreement to clarify the matter and to determine the nature and manner of action of this Agreement with respect to that person. There have also been important developments that have influenced the Canada-China treaty. On February 19, 2012, the Canadian Prime Minister`s Office announced that Canadian and Chinese authorities had reached an agreement in principle on updating the Canada-China contract. Expected future updates to the Canada-China treaty could impact the benefits of structuring investment structures from mainland China to Canada via Hong Kong. These outbound investment structures should therefore be reviewed as soon as the draft new Canada-China treaty has been published. 2. The competent authority shall endeavour, if the objection appears to it to be justified and if it is unable to find a satisfactory solution itself, to settle the matter by mutual agreement with the competent authority of the other Contracting State with a view to reversing taxes which are not in conformity with the provisions of this Agreement. Did you know that Canada has signed a social security agreement with China? It will enter into force on 1 January 2017. The agreement eliminates dual coverage under Canada`s pension plan and China`s social security system. .