22 July 2014
On 21 July 2014, Canada and the U.K. signed a protocol to the 1978 income and capital tax treaty between the two countries. The protocol is the fourth to amend the treaty, and includes multiple amendments. Main changes are as follows.
Several articles were amended to be brought in line with OECD model standards, including:
A provision is added that dividends payment will be exempt from withholding tax when paid to an organization that is established and operates in the other State, and 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:
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.
The protocol will enter into force once the ratification instruments are exchanged. It will apply for Canada from 1 January of the year following its entry into force. For the U.K. it will apply for withholding taxes from 1 January of the year following its entry into force, for corporation tax from 1 April following its entry into force, and for income and capital gains tax from 6 April following its entry into force.
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