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Weekly tax highlights - October 20, 2011

October 20, 2011

Shaping the future of Canadian innovation: the Jenkins panel report

On October 17, 2011, the final report was delivered by the independent expert panel chaired by Thomas Jenkins, Executive Chairman of OpenText Corporation; the panel was tasked with reviewing federal support for research and development. Innovation is one of the most important contributors to persistent and sustained economic growth and a key solution to Canada’s lagging productivity, as discussed in Deloitte’s The future of productivity: An eight-step game plan for Canada. Read more in our latest R&D tax update.

Join us for a live webcast: the Jenkins panel report and the future of innovation in Canada

Join Canadian business leaders and Deloitte partners on October 24, 2011 for a panel discussion on the future of Canadian innovation and the report of the Jenkins panel.

Register now for this webcast.

Canada has endured the economic shake-up since 2008 better than most countries. And yet, our nation’s lagging productivity is the single greatest threat to our long-term global competitiveness and sustained growth. Following the release of the Jenkins panel report, a panel of business leaders and Deloitte partners will discuss its findings with a focus on finding solutions that will make Canada a more innovative and prosperous nation.

8:15 am – Pacific Daylight Time  11:15 am – Eastern Daylight Time
9:15 am – Mountain Daylight Time 12:15 pm – Atlantic Daylight Time
10:15 am – Central Daylight Time 12:45 pm – Newfoundland Daylight Time

Entry into force of the TIEA between Canada and Anguilla

The Tax Information Exchange Agreement (TIEA) previously concluded between Canada and Anguilla under entrustment from the Government of the United Kingdom of Great Britain and Northern Ireland entered into force on October 12, 2011.

TIEAs provide for the mutual exchange of tax information with a view to better administering and enforcing taxation laws and preventing international fiscal evasion. As well, the Income Tax Regulations were amended in 2008 to extend to countries with which Canada has a TIEA certain favourable corporate tax provisions that had previously only been available to countries with which Canada has concluded a tax treaty. These incentives provide that if a jurisdiction enters into a TIEA with Canada, active business income earned by a foreign affiliate of a Canadian corporation that is resident in that jurisdiction and carrying on business there will be included in “exempt surplus” and, consequently, dividends paid to the Canadian corporation from the affiliate will not be subject to Canadian tax. The Regulations provide that a foreign affiliate of a Canadian company that is resident in a country which has entered into a TIEA with Canada can 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. Thus, a foreign affiliate in Anguilla that has a taxation year based on the calendar year will be eligible to earn exempt surplus for its entire 2011 taxation year.

For more information on Canada’s TIEAs, please see our previous Alert. For a list of jurisdictions with which Canada has entered into a TIEA or with which negotiations are ongoing, please see the Department of Finance website.

OECD discussion paper on the definition of permanent establishment

On October 12, 2011, the Organisation for Economic Co-operation and Development (OECD) published on its website a Discussion Draft (DD) on the interpretation and application of article 5 (Permanent Establishment) of the OECD Model Tax Convention. The OECD has invited interested parties to submit comments on the DD before February 10, 2012. Article 5 includes the definition of permanent establishment, a concept used to allocate taxing rights between treaty partner countries when an enterprise of one treaty partner country derives business profits from the other partner country. Read more in Deloitte’s Global Tax Alert.


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