CRA finds that an information exchange agreement between one of Canada’s treaty partner’s and its overseas territory did not render the latter a “designated treaty country”

The territorial scope of the income tax Treaty between Country A and Canada specified that the term “Country A” did not encompass its overseas territory (“Sub-jurisdiction A”). However, Country A then entered into a bilateral agreement with Sub-jurisdiction A for the exchange of information between their competent authorities for the carrying out of Country A’s obligations under its tax treaties or comprehensive tax information exchange agreements (“TIEAs”).

In finding that Sub-jurisdiction A would not be considered a “designated treaty country” under Reg. 5907(11), CRA first noted that such provision clearly provides that a designated treaty country does not include any territory to which the relevant tax treaty or TIEA does not apply, and then stated:

[S]uch [subsequent] agreement will not, by itself, extend the territorial scope of the Canada - Country A tax treaty to Sub-jurisdiction A. The territorial scope of a tax treaty must be determined in accordance with the terms of the treaty and international law.

Neal Armstrong. Summary of 1 March 2023 External T.I. 2023-0990821E5 under Reg. 5907(11).