Protocol Amending the Convention Between the Government of Canada and the Government of the United Kingdom of Great Britain and Northern Ireland - 2003

Notices of Tax Treaty Developments - Status of Tax Treaties


This electronic version of the Canada-UK Protocol signed on May 7, 2003 is provided for convenience of reference only and has no official sanction.


The Government of Canada and the Government of the United Kingdom of Great Britain and Northern Ireland;

DESIRING to conclude a Protocol to amend further the Convention between the Governments of the Contracting States for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains, signed at London on 8 September 1978, as amended by the Protocol signed at Ottawa on 15 April 1980 and as further amended by the Protocol signed at London on 16 October 1985 (hereinafter referred to as "the Convention");

HAVE AGREED

as follows:

1. Sub-paragraph (c) of paragraph 1 of Article 3 of the Convention shall be deleted and replaced by the following:
2. Clause (i) of sub-paragraph (h) of paragraph 1 of Article 3 of the Convention shall be deleted and replaced by the following:
Paragraph 3 of Article 4 of the Convention shall be deleted and replaced by the following:

Article 9 of the Convention shall be deleted and replaced by the following:

"ARTICLE 9

Associated enterprises

1. Where:

and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included by a Contracting State in the profits of that enterprise and taxed accordingly.

2. Where a Contracting State includes in the profits of an enterprise of that State - and taxes accordingly - profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then, subject to the provisions of paragraph 3 of this Article, that other State shall (notwithstanding any time limits in the domestic law of that other State) make an appropriate adjustment to the amount of tax charged therein on the profits. In determining such adjustment, due regard shall be had to the other provisions of this Convention and the competent authorities of the Contracting States shall if necessary consult each other.

3. Where a Contracting State makes or proposes to make an adjustment in accordance with the provisions of paragraph 1 of this Article, the other Contracting State shall be required to make the appropriate adjustment provided for under paragraph 2 of this Article to the profits of the associated enterprise in that other State only if within six years from the end of the taxation year (in Canada) or the chargeable period (in the United Kingdom) to which the first-mentioned adjustment relates, the competent authority of the other State has been notified that the first-mentioned adjustment has been made or proposed.

4. The provisions of paragraphs 2 and 3 of this Article shall not impose any obligation on Canada in the case of fraud, wilful default or gross negligence or on the United Kingdom in the case of fraudulent conduct."

1. Paragraphs 1 and 2 of Article 10 of the Convention shall be deleted and replaced by the following:
2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State the tax so charged shall not exceed:

The provisions of this paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid."

2. Paragraph 3 of Article 10 of the Convention shall be deleted.

3. Paragraph 5 of Article 10 of the Convention shall be deleted and replaced by the following:
4. Paragraph 7 of Article 10 of the Convention shall be deleted and replaced by the following:
1. Paragraph 3 of Article 11 of the Convention shall be deleted and replaced by the following:
2. Paragraph 6 of Article 11 of the Convention shall be deleted and replaced by the following:
3. The following new paragraph shall be inserted immediately after paragraph 10 of Article 11 of the Convention:
1. Paragraph 3 of Article 12 of the Convention shall be deleted and replaced by the following:

arising in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxable only in that other State."

2. Paragraph 5 of Article 12 of the Convention shall be deleted and replaced by the following:
3. The following new paragraph shall be inserted immediately after paragraph 7 of Article 12 of the Convention:
1. Paragraph 9 of Article 13 of the Convention shall be deleted and replaced by the following:
2. The following new paragraph shall be inserted immediately after paragraph 9 of Article 13 of the Convention:
1. Paragraph 1 of Article 17 of the Convention shall be deleted and replaced by the following:
2. Paragraph 3 of Article 17 of the Convention shall be deleted and replaced by the following:
3. Paragraph 4 of Article 17 of the Convention shall be deleted and replaced by the following:

The following new Article shall be inserted immediately after Article 20 of the Convention:

"Article 20A

1. Items of income beneficially owned by a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that State.

2. The provisions of paragraph 1 of this Article shall not apply to income, other than income from immovable property, if the beneficial owner of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14 of this Convention, as the case may be, shall apply.

3. Notwithstanding the provisions of paragraphs 1 and 2 of this Article, items of income of a resident of a Contracting State not dealt with in the foregoing Articles of this Convention and arising in the other Contracting State may also be taxed in that other State."

1. Paragraph 1 of Article 21 of the Convention shall be deleted and replaced by the following:

2. Paragraph 4 of Article 21 of the Convention shall be deleted.

The reference in paragraph 3 of Article 22 of the Convention to "10 per cent" shall be deleted and replaced by a reference to "5 per cent".

Article 24 of the Convention shall be deleted and replaced by the following:

"Article 24

Exchange of information

1. The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by this Convention insofar as the taxation thereunder is not contrary to this Convention, in particular, to prevent fraud and to facilitate the administration of statutory provisions against legal avoidance. This includes information relating to the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by this Convention. The exchange of information is not restricted by Article 1 of this Convention. Any information received by a Contracting State shall be treated as secret and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by this Convention. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions.

2. In no case shall the provisions of paragraph 1 of this Article be construed so as to impose on a Contracting State the obligation:

3. If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall obtain that information in the same manner and to the same extent as if the tax of the first-mentioned State were the tax of that other State and were being imposed by that other State, notwithstanding that the other State may not, at that time, need such information for the purposes of its own tax."

1. Paragraphs 2 and 3 of Article 27 of the Convention shall be deleted and replaced by the following:

2. Paragraph 4 of Article 27 of the Convention shall be deleted.

3. The following new paragraph shall be added immediately after paragraph 6 of Article 27 of the Convention:
The Governments of the Contracting States shall inform one another, through diplomatic channels, of the completion of the procedures required by their laws for the bringing into force of this Protocol. This Protocol shall enter into force on the date of the later of these notifications and shall thereupon have effect:

IN WITNESS WHEREOF the undersigned, duly authorised thereto by their respective governments, have signed this Protocol.

DONE in duplicate at London, this 7th day of May 2003, in the English and French languages, both texts being equally authoritative.

FOR THE GOVERNMENT OF CANADA



Mel Cappe

FOR THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND

Dawn Primarolo









7 May 2003

Excellency:

I have the honour to refer to the Protocol amending the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Canada for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains, signed at London on 8 September 1978, as amended by the Protocol signed at Ottawa on 15 April 1980 and as further amended by the Protocol signed at London on 16 October 1985, which has been signed today and to make on behalf of the Government of the United Kingdom of Great Britain and Northern Ireland the following proposals:

With reference to Articles IV, V and VI:

It is understood that, in the event that, pursuant to an agreement or convention concluded after the date of signature of this Protocol with a country that is a member of the Organisation for Economic Co-operation and Development, Canada agrees to a rate of tax on dividends, interest, or royalties lower than that provided for in the Convention, the appropriate authorities of the Contracting States shall consult at the earliest opportunity with respect to further reductions in the withholding taxes provided for in the Convention.

With reference to paragraph 1 of Article VII:

It is understood that an individual who becomes a resident of the United Kingdom and is treated as resident for any year of assessment from the date of arrival shall be charged to capital gains tax only in respect of chargeable gains from the alienation of property made after the date of arrival, provided that the individual has not been resident or ordinarily resident in the United Kingdom at any time during the six years immediately preceding the alienation of the property and that the gain in question is not one that is chargeable on the individual as the settlor of a settlement under sections 77-79 or section 86 and Schedule 5 of the Taxation of Chargeable Gains Act 1992.

With reference to Article XII:

It is understood that the provisions of Article 24 (Exchange of Information) of the Convention, as amended by Article XII of the Protocol signed today, shall have effect from the date of entry into force of the Protocol, without regard to the taxable or chargeable period to which the request for information relates.

If the foregoing proposals are acceptable to the Government of Canada, I have the honour to suggest that the present note and Your Excellency's reply to that effect shall be regarded as constituting an agreement between the two Governments in this matter, which shall enter into force at the same time as the Protocol.

I avail myself of this opportunity to extend to Your Excellency the assurance of my highest consideration.

Dawn Primarolo


7 May 2003

Excellency:

I have the honour to refer to your note dated 7 May 2003 which reads as follows:

"I have the honour to refer to the Protocol amending the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Canada for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains, signed at London on 8 September 1978, as amended by the Protocol signed at Ottawa on 15 April 1980 and as further amended by the Protocol signed at London on 16 October 1985, which has been signed today and to make on behalf of the Government of the United Kingdom of Great Britain and Northern Ireland the following proposals:

With reference to Articles IV, V and VI:

It is understood that, in the event that, pursuant to an agreement or convention concluded after the date of signature of this Protocol with a country that is a member of the Organisation for Economic Co-operation and Development, Canada agrees to a rate of tax on dividends, interest, or royalties lower than that provided for in the Convention, the appropriate authorities of the Contracting States shall consult at the earliest opportunity with respect to further reductions in the withholding taxes provided for in the Convention.

With reference to paragraph 1 of Article VII:

It is understood that an individual who becomes a resident of the United Kingdom and is treated as resident for any year of assessment from the date of arrival shall be charged to capital gains tax only in respect of chargeable gains from the alienation of property made after the date of arrival, provided that the individual has not been resident or ordinarily resident in the United Kingdom at any time during the six years immediately preceding the alienation of the property and that the gain in question is not one that is chargeable on the individual as the settlor of a settlement under sections 77-79 or section 86 and schedule 5 of the Taxation of Chargeable Gains Act 1992.

With reference to Article XII:

It is understood that the provisions of Article 24 (Exchange of Information) of the Convention, as amended by Article XII of the Protocol signed today, shall have effect from the date of entry into force of the Protocol, without regard to the taxable or chargeable period to which the request for information relates.

If the foregoing proposals are acceptable to the Government of Canada, I have the honour to suggest that the present note and Your Excellency's reply to that effect shall be regarded as constituting an agreement between the two Governments in this matter, which shall enter into force at the same time as the Protocol."

The foregoing proposals being acceptable to the Government of Canada, I have the honour to confirm that your note and this reply shall be regarded as constituting an agreement between the two Governments in this matter which shall enter into force at the same time as the Protocol.

Please accept the renewed assurance of my highest consideration.

Mel Cappe

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