CRA confirms that use of the Canada-Brazil Treaty FTC provisions is not limited by the federal s. 126 strictures (but also does not generate an Ontario FTC for tax spared amounts)

The Ontario Taxation Act incorporates by reference the foreign tax credit rules in the federal Act (i.e., s. 126) together with any other federal statutory (including Treaty) provisions which affect the application of those rules.  However, a Canadian taxpayer who wishes to rely on the FTC provisions of the Canada-Brazil Treaty including a tax sparing provision (i.e., a provision that deems Brazilian withholding tax to have been levied even if it has not) applies those provisions independently of s. 126, so that it is not entitled to an Ontario FTC for the tax sparing amount.

Before so concluding, CRA noted in passing that where the Treaty FTC provisions are applied federally, "none of the provisions of section 126 of the Act, including subsections 126(4.1) and (4.2) can be applied to deny such a Federal FTC claim."

Neal Armstrong.  Summaries of 16 June 2014 Memo 2014-0525961I7 under Taxation Act, s. 34(1) and Treaties - Art. 24.