Canada, Switzerland Improve Tax Agreement

by Mike Godfrey, Tax-News.com, Washington

25 October 2010

The Canadian government has announced the signing of a protocol to the existing double tax agreement it has concluded with Switzerland, and the commencement of negotiations for the signing of tax information exchange agreements with the Cook Islands and Vanuatu.

The Swiss protocol will update the double tax agreement signed by Canada on May 5, 1997, to include provisions that will allow the respective countries’ tax authorities to request tax information relating to civil tax matters and in the investigation of fiscal crime.

Along with the information exchange provisions, Switzerland and Canada have agreed to exempt dividend payments to pension funds, and the central bank from withholding tax. Interest payments between unrelated persons will also be exempt from withholding tax in the future. Moreover, the scope of application of the withholding tax exemption for royalty payments has been extended, and an arbitration clause has been added.

The protocol to the agreement will enter into force after it has been ratified by both parties.

Also in statements on October 22, the Canadian government announced that negotiations had begun towards further agreements to include the Organization for Economic Cooperation and Development’s standard on transparency and information exchange with Vanuatu and the Cook Islands.

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