CRA confirms that the Canadian competent authority will only enter into deferral agreements where there is potential double taxation

Some of the treaties contemplate that the Canadian competent authority may agree to the deferral of recognition of gain under a reorganization transaction where there is no recognition of gain to a resident of the other country under the tax laws of that country.  CRA has confirmed that the Canadian competent authority may enter into such a deferral agreement only where gain is deferred under the foreign tax law rather than being exempted - even where the Treaty (e.g., Art. 8, para. 5 of the Canada-Italy Convention) does not specifically stipulate that such a deferral agreement is being entered into "in order to avoid double taxation" (see Art. XIII, para. 8 of the Canada-U.S. Convention).

Neal Armstrong.  Summary of 17 May 2012 IFA Conference 2012-0444161C6 under Treaties - Art. 13.