In general, a trust will be resident in Canada for income tax purposes if one or more Canadian residents exercise the central management and control of the trust. A careful examination of the facts is necessary to determine where the central management and control of a trust is exercised. In addition, some non-resident trusts will be deemed to be resident in Canada in certain circumstances. A taxpayer who is considered under Canadian domestic law to be resident in Canada and at the same time resident in another country may be deemed by an applicable tax treaty to be resident in only one country for tax purposes under “tie-breaker rules” in the applicable tax treaty. TAX TREATIES Canada has an extensive network of treaties, with 94 treaties currently in force (and additional tax treaties signed but not yet ratified). A number of Canada’s tax treaties are currently under negotiation or renegotiation. The appendix to this chapter contains a complete list of the Canadian tax treaties in force as of July 10, 2023. For many years the federal government has voiced its intention to curb “treaty-shopping” structures whereby a person not entitled to the benefits of a particular treaty invests in Canada through an entity resident in the relevant country to gain Canadian tax benefits under the treaty. Canada has been an active member of the OECD/G20 base erosion and profit shifting (BEPS) project. Canada (together with, as of July 10, 2023, 100 other countries, not including the United States) has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The MLI is not a stand-alone tax treaty but modifies existing bilateral treaties involving countries that have signed the MLI. The MLI requires participating countries to agree to BEPS minimum standards with respect to treaty shopping and dispute resolution. Canada has listed 84 of its 94 tax treaties as Covered Tax Agreements, which
A corporation will be considered to be resident in Canada if its central management and control is located in Canada.
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Doing Business in Canada
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