Canada, China Agree To Update DTA

by Mike Godfrey, Tax-News.com, Washington

13 February 2012

Canada's Prime Minister has welcomed an agreement in principle negotiated with China that would update the two countries' existing Double Tax Agreement with the stated aim of reducing tax barriers and encouraging bilateral economic trade and investment.

The countries' existng agreement dates back to 1986 and since then Canada’s tax treaty and domestic tax policies and the standards that it includes in its tax treaty standards have evolved, the Canadian government said.

The updated treaty will include modernized provisions to conform with modern international tax treaty policies, including to add tax transparency and tax information exchange provisions, based on the Organization for Economic Cooperation and Development's model agreement.

The updated tax treaty will also reduce the levels of withholding tax placed on bilateral trade and investment; and eliminate double taxation for individuals as well as companies doing business or earning income in the other country.

The updated treaty is subject to approval by the governments of Canada and China before it can be signed, and will enter into force once it has been ratified by both countries.

Canada currently has tax treaties in force with 89 countries. China is Canada’s second largest two-way trading partner.

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