Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principales Questions: 1. Information Circular IC71-17R5 Guidance on Competent Authority Assistance Under Canada’s Tax Conventions is currently being revised. In paragraph 43 of this revised draft information circular, it is stated that paragraph 247(2)(b) is one of the “anti-avoidance provisions of the Act”. Could the CRA elaborate further on its views with respect to this position? 2. In the case where paragraph 247(2)(b) is applied to (re)assess, does the CRA intend to restrict a taxpayer’s right to access the Mutual Agreement Procedure (MAP) provision of the pertinent international tax treaty? If so, would the CRA be willing to provide further details regarding this position?
Position Adoptée: 1. The revisions to IC71-17 have not yet been finalized so no definitive comments can be provided at this time. The CRA confirmed that paragraph 43 of the draft revised IC circulated for consultation is intended to reflect the same position as currently exists in paragraph 27 of IC71 17R5 and reflects existing Competent Authority practice. 2. The CRA considers that paragraph 247(2)(b) of the Act is part of Canada’s anti-avoidance provisions. Therefore, the Canadian Competent Authority will not deny requests under the MAP provisions of an international tax treaty where the (re)assessment relies on paragraph 247(2)(b) of the Act. For those cases where the (re)assessment relies on an anti-avoidance provision of the Act as the primary assessing position, such as section 245 or paragraph 247(2)(b) of the Act, the Canadian Competent Authority will limit itself to forwarding the case to the other competent authority for relief from potential double taxation.
2020 International Fiscal Association Conference
CRA Roundtable
Question 3 – Draft IC71-17R6, Paragraph 43
We understand that Information Circular IC71-17R5 Guidance on Competent Authority Assistance Under Canada’s Tax Conventions is currently being revised. In paragraph 43 of this revised draft information circular, it is stated that paragraph 247(2)(b) is one of the “anti-avoidance provisions of the Act”. Could the CRA elaborate further on its views with respect to this position?
In addition, in the case where paragraph 247(2)(b) is applied to (re)assess, does the CRA intend to restrict a taxpayer’s right to access the Mutual Agreement Procedure (MAP) provision of the pertinent international tax treaty? If so, would the CRA be willing to provide further details regarding this position?
CRA Response
The revisions to IC71-17 have not yet been finalized so no definitive comments can be provided at this time. We can confirm that paragraph 43 of the draft revised IC circulated for consultation is intended to reflect the same position as currently exists in paragraph 27 of IC71-17R5 and reflects existing Competent Authority practice. The draft revision only proposes to expand on the existing position by adding examples of particular anti-avoidance provisions of the Income Tax Act (Act).
The CRA considers that paragraph 247(2)(b) of the Act is part of Canada’s anti-avoidance provisions. As with other cases involving the application of Canadian anti-avoidance provisions, the Canadian Competent Authority will not deny requests under the MAP provisions of an international tax treaty where the (re)assessment relies on paragraph 247(2)(b) of the Act and will accept them using the same criteria as any other MAP request. For those cases where the (re)assessment relies on an anti-avoidance provision of the Act as the primary assessing position, such as section 245 or paragraph 247(2)(b) of the Act, the Canadian Competent Authority will limit itself to forwarding the case to the other competent authority for relief from potential double taxation. Similar to GAAR cases that are reviewed by the GAAR Committee, (re)assessments that rely on paragraph 247(2)(b) of the Act are also subject to a rigorous review process by the Transfer Pricing Review Committee before being made.
Angelina Argento/Marie-Claude Routhier
September 15, 2020
2020-085337
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