Questions and answers - Convention on Mutual Administrative Assistance in Tax Matters

• Q1. What are the objectives of the Convention on Mutual Administrative Assistance in Tax Matters (the “Convention”)?
• Q2. When was the Convention established?
• Q3. Why was the Convention updated in 2010?
• Q4. Who has signed the updated Convention?
• Q5. How will Canada benefit from having signed and ratified the updated Convention?
• Q6. How is the confidentiality of taxpayer information protected?
• Q7. Will the proprietary information of the Canadian businesses be protected?
• Q8. How much will the updated Convention cost taxpayers?
• Q9. Is this updated Convention consistent with our international tax treaty network?
• Q10. What organizations in the updated Convention’s participating countries will receive information on Canadian taxpayers?
• Q11. By virtue of being a party to the updated Convention, has Canada agreed to assist other countries collect taxes?
• Q12. When will the updated Convention come into force?

Q1. What are the objectives of the Convention on Mutual Administrative Assistance in Tax Matters (the “Convention”)?

A1. The Convention provides many forms of administrative cooperation between states in the assessment and collection of taxes, in particular with a view to combating tax avoidance and evasion. This cooperation ranges from exchange of information, including automatic exchanges, to the recovery of foreign tax claims.

Q2. When was the Convention established?

A2. The Convention was developed jointly by the Organisation for Economic Cooperation and Development (OECD) and the Council of Europe and opened for signature by the member states of both organisations on January 25, 1988. The Convention is the most comprehensive multilateral instrument available for tax cooperation and exchange of information.

Q3. Why was the Convention updated in 2010?

A3. The Convention was updated by the protocol (hereinafter referred to as the “updated Convention”) to align it to the international standard on exchange of information that prevents bank secrecy laws from impeding the sharing of information and to invite all countries to become signatories.

Q4. Who has signed the updated Convention?

A4. Canada signed the Convention on April 28, 2004, and the protocol on November 3, 2011.

The updated Convention has been signed by most OECD, G20 and a growing number of developing countries.

As of November 12, 2013, more than 60 countries have signed the updated Convention or have committed to do so, including all members of the G20, most OECD member countries and most European Union member countries. These countries include: Albania, Andorra, Argentina, Australia, Austria, Azerbaijan, Belgium, Belize, Brazil, Canada, China, Chile, Colombia, Costa Rica, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Ghana, Greece, Guatemala, Hungary, Iceland, India, Indonesia, Ireland, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Malta, Mexico, Moldova, Morocco, Netherlands, New Zealand, Nigeria, Norway, Poland, Portugal, Romania, Russian Federation, Saudi Arabia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Tunisia, Turkey, Ukraine, United Kingdom, and United States.

The following jurisdictions are also covered by the updated Convention through territorial extension by Denmark: the Faroe Islands and Greenland; by territorial extension by the Netherlands: Aruba, Curacaos and Saint Maarten; and by territorial extension by the United Kingdom: the Cayman Islands, Montserrat and Turks and Caicos.

For updates on the list of signatories to the Convention please refer to the chart of signatures and ratifications at: http://www.oecd.org/tax/exchange-of-tax-information/Status_of_convention.pdf.

Q5. How will Canada benefit from having signed and ratified the updated Convention?

A5. By becoming a Party to the updated Convention, Canada has confirmed its commitment to combat international tax avoidance and tax evasion. More particularly, the updated Convention offers the Canada Revenue Agency (CRA) the following advantages:

• It extends the number of countries with which the CRA can exchange information or engage in more robust forms of information sharing;
• It allows the CRA to request information relevant to its administration of a broader range of taxes in comparison with certain of Canada’s 92 bilateral tax treaties. For example, in addition to income taxes, certain taxes that fall under the Excise Tax Act (such as GST/HST) and the Excise Act, 2001 are covered; and,
• It allows the CRA to more efficiently engage in multilateral forms of tax cooperation.

Q6. How is the confidentiality of taxpayer information protected?

A6. The updated Convention has detailed provisions governing the privacy of taxpayer information.

The updated Convention contains a privacy provision which states that any information exchanged shall be treated as secret and shall not be disclosed to any persons other than those concerned or involved with the assessment or collection of the taxes to which the updated Convention applies.

Q7. Will the proprietary information of the Canadian businesses be protected?

A7. Yes. The updated Convention stipulates that the country providing the information is not obliged to disclose any trade, business, industrial, commercial or professional secret or trade process.

Q8. How much will the updated Convention cost taxpayers?

A8. The updated Convention will not cost any money to Canadian taxpayers since the CRA has already established a structure and process for the international exchange of tax information.

Q9. Is this updated Convention consistent with our international tax treaty network?

A9. Yes. All of Canada’s bilateral tax treaties contain exchange of information provisions. The updated Convention follows the same approach with respect to exchange of information and the need to keep privacy and confidentiality paramount in any exchange. The updated Convention complements Canada’s tax treaty network in that it will allow the CRA to improve tax cooperation with jurisdictions with which Canada does not have a tax treaty or a tax information exchange agreement.

Q10. What organizations in the updated Convention’s participating countries will receive information on Canadian taxpayers?

A10. Information will only be provided to the national tax authority in other signatory countries and, according to the updated Convention, and can only be used for tax purposes unless Canada authorizes other uses.

Q11. By virtue of being a party to the updated Convention, has Canada agreed to assist other countries collect taxes?

A11. No. Canada is only bound by the exchange of information provisions of the updated Convention.

Canada has not agreed to assist other countries collect taxes from Canadian residents because it prefers to continue to negotiate assistance in the collection of taxes on a bilateral basis.

Q12. When will the updated Convention come into force?

A12. Canada deposited it instruments of ratification on November 21, 2013. In accordance with its terms, the updated Convention will come into force in Canada on March 1, 2014.