Tax Information Exchange Agreements Ratified with Bermuda and the Cayman Islands
International tax alert, June 2, 2011
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As expected, the Tax Information Exchange Agreements (TIEAs) previously concluded with Bermuda and the Cayman Islands (see our International Tax Alert, of April 20, 2011) have been ratified. The Bermuda TIEA will enter into force on July 1, 2011 and the Cayman Islands TIEA entered into force on June 1, 2011. Since these agreements do not apply to excise taxes, they are not affected by the technical problem we described in that Alert which will delay the ratification of many other Canadian TIEAs.
In addition to the implications of these agreements relating to the exchange of tax information between those countries and the Canada Revenue Agency, Canadian tax regulations provide that a foreign affiliate of a Canadian company that is resident in Bermuda or the Cayman Islands can begin to earn “exempt surplus” in respect of active business income for its taxation year that includes the effective date of the particular TIEA, retroactive to the beginning of the taxation year. Exempt surplus can be returned to the Canadian company without further Canadian tax. Please see our previous Alert for more information.
The Department of Finance also announced today that negotiations to enter into a TIEA have commenced with Antigua and Barbuda, Grenada, Montserrat and Uruguay. For more information on the status of TIEA negotiations, please see the Department of Finance website.
Sandra Slaats, Toronto
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