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Canada: Canadian government introduces treaty shopping consultation paper



Edward Miller

Ron Richler

In the March 2013 Canadian Federal Budget, the Minister of Finance announced an intention to consult on possible measures to "protect the integrity of Canada's tax treaties while preserving a business tax environment that is conducive to foreign investment". This protection was seen as necessary in response to the practice of "treaty shopping". On August 12 2013, the Canadian Department of Finance released a consultation paper on treaty shopping. The government stated that it would accept comments until December 13 2013.

The consultation paper defines "treaty shopping" generally as "a situation under which a person who is not entitled to the benefits of a tax treaty uses an intermediary entity that is entitled to such benefits in order to indirectly obtain those benefits".

The consultation paper outlines the government's view on treaty shopping and its attempts to challenge treaty shopping over the years, its limited success in challenging what it considers to be abusive transactions in the courts and statistics it points to as evidence of treaty shopping with respect to Canada. The unintended consequences of treaty shopping are then identified in the consultation paper. The consultation paper goes on to discuss the relative merits of different possible approaches, including either a domestic tax rule or a treaty-based rule, and either a general rule or one or more specific rules. The consultation paper invited comment with reference to seven general questions dealing with the foregoing issues.

While it is too early to anticipate precisely which approach the government is likely to pursue to combat its perceived treaty abuse concerns, it seems clear that the Canadian federal government intends to introduce some kind of new measures in this regard.

Edward Miller ( and Ron Richler (

Blake Cassels & Graydon

Tel: +1 416 863 2400

Fax: +1 416 863 2653


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