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Canada-United Kingdom

22 December 2014

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Protocol to the Tax Treaty between Canada and the U.K. has Entered into Force

According to an announcement by the Canadian Department of Finance, the protocol to the 1978 income and capital tax treaty between Canada and the United Kingdom entered into force on 18 December 2014. The protocol is the fourth to amend the treaty, and includes multiple amendments. The main changes are as follows.

OECD Model Standards

Several articles are amended to be brought in line with OECD model standards, including:

  • Article 7 Business Profits
  • Article 23 Mutual Agreement Procedures (with an added arbitration provision)
  • Article 24 Exchange of Information
  • Article 24A Assistance in the Collection of Taxes (an addition)


A provision is added that dividend payments will be exempt from withholding tax when paid to an organization that is established and operates in the other State when the organization exclusively administers or provides benefits under one or more recognized pension plans. In order to obtain the benefit, the following conditions must be met:

  • The organization must be the beneficial owner of the shares on which the dividends are paid, holds those shares as an investment, and is generally exempt from tax in the other State;
  • The organization cannot own directly or indirectly more than 10% of the capital or voting power of the company paying the dividends; and
  • Each recognized pension plan must provide benefits primarily to individuals who are resident of the other State


Article 11 on interest is replaced. The general 10% withholding tax rate remains, but a provision is added that interest payments will be exempt from withholding tax if the beneficial owner and the payer are dealing at arm's length.

Effective Date

The protocol applies in Canada from 1 January 2015. In the U.K. it will apply for withholding taxes from 1 January 2015, for corporation tax from 1 April 2015, and for income and capital gains tax from 6 April 2015.

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