Article 26

See Also

Assistant Director of Income Tax-I, New Delhi v. M/s E-Funds IT Solution Inc., Civil Appeal No. 6082 of 2015, 24 October 2017, (2018), 13 SCC 294

MAP agreement re PEs not binding for subsequent years

A MAP settlement agreement between the U.S. and India for other years that treated two affiiliated U.S.-reisdent companies (e-Funds and IT Solutions) as having permanent establishments in India did not bear on whether they had PEs in the years in question given that the competent authority determinations stated therein were stated not to be binding in subsequent years and that the U.S. Treasury Department had stated "although we do not agree on the technical merits that e-Funds and IT Solutions had a PE in India, we reached a mutual agreement with a view to avoid double taxation."

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 5 provision of ancillary services rather than direct customer services does not engage a services PE 459

Alberta Printed Circuits Ltd. v. The Queen, 2011 DTC 1177 [at 967], 2011 TCC 232

Pizzitelli J. found (at [paras. 102-103) that the limitation periods in Articles IX(3) and XXVII(3) of the Canada-Barbados Tax Treaty did not apply because the taxpayer was a Barbados International Business Company, which Article XXX expressly excludes from application of the Treaty. He also noted (at para. 104) that given that Article IX(2) and (3) dealt specifically with transfer pricing adjustments "one must question the applicability of another, more general limitation period found in a different part of the Treaty, such as Article XXVII(3), especially where that other limitation period is similar."

Meyer v. The Queen, 2004 DTC 2393, 2004 TCC 199 (Informal Procedure)

The taxpayer, who was a U.S. citizen resident in Canada, did not claim treaty benefits when filing his U.S. return, with the result that his U.S.-source pension income was subject to U.S. income tax at graduated rates rather than the treaty-reduced rate of 15%.

In finding that competent authority relief was not available to the taxpayer, Hershfield J. noted that "in self-assessing systems, it is incumbent on taxpayers to file on the basis prescribed by their circumstances".

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 126 - Subsection 126(7) - Non-Business-Income Tax amount paid in error not a tax 131
Tax Topics - Treaties - Income Tax Conventions - Article 24 overpayment of U.S. tax not U.S. tax 148

Administrative Policy

17 May 2022 IFA Roundtable Q. 13, 2022-0926381C6 - Statistics on MAPs

around half of CRA’s recent MAP cases resulted in full relief

CRA provided the following statistics on MAPs for the 2020 calendar year:

  • … The average time to complete a negotiable MAP case was 17.83 months;
  • Of the 74 MAP cases closed in 2020, 36 cases (i.e., 48.6%) resulted in full relief from double taxation upon negotiation, 9 cases (i.e., 12.2%) had objections not justified, and 8 cases (i.e., 10.8%) were resolved through unilateral relief. The remaining 21 cases (i.e., 28.4%) were either withdrawn by the taxpayers, resolved via domestic remedy, resulted in no agreement or were denied MAP access;
  • Of the 74 MAP cases closed in 2020, 60 (i.e., 81%) were initiated by Canada and 14 (i.e., 19%) were initiated by countries other than Canada; and
  • The CRA is currently engaged in negotiable MAP cases involving taxpayers from 31 different jurisdictions. The United States represents 46% of these MAP cases.

5 May 2021 IFA Roundtable, Q.6

disclosure of number and nature of cases brought to arbitration is prohibited

When asked to disclose statistics on the number of cases that have been brought to arbitration under each of Canada’s tax treaties and to describe the underlying issues, CRA indicated: Pursuant to international agreements, disclosure of such information is not permitted.

3 February 2021 Transfer Pricing Webinar of the Canadian Tax Foundation: Panel IV: Selected Topics in Transfer Pricing

MAP referrals for non-s. 247(2) adjustments

  • There is nothing preventing a MAP request relating to a s. 18(1)(a) matter, where that matter potentially gives rise to double-taxation.

APAs on restructurings

  • CRA historically has been reticent about negotiating advance pricing agreements on restructurings, e.g., where a taxpayer is seeking to restructure to move its IP into a low-tax jurisdiction. However, the CRA would like to become bolder about business restructurings for commercial purposes.

3 February 2021 Transfer Pricing Webinar of the Canadian Tax Foundation: Panel I: Transfer Pricing Audits and Competent Authority

CASD does not share its APA paper with the taxpayer before submitting it to the other Treaty partner

  • CASD has stopped sharing a copy of its APA paper to the taxpayer for comments before sending it to a treaty partner. The APA paper reflects the exchanges between the tax administrations. If there are any differences in the understanding of the facts between the competent authorities which could be of concern, CASD will ask the taxpayer for clarification or confirmation of our understanding.

CASD’s refusal to negotiate s. 247(2)(d) assessments

  • Since ss. 247(2)(b) and (d) are part of Canada’s domestic anti-avoidance legislation, CASD will not revisit CRA’s conclusions under s. 247, but will submit the case to the other competent authority who may decide to provide relief on their end. Canada (consistently with OECD guidance) does not consider anti-avoidance adjustments to result in taxation that is not in accordance with the Treaty.

CASD’s willingness to negotiate Treaty anti-abuse provisions

  • The CRA will, however, negotiate in cases where the anti-avoidance provision is found in a treaty rather than the Act.

15 September 2020 IFA Roundtable Q. 4, 2020-0853391C6 - IFA 2020 Q4: Impact Covid-19 on CRA procedures

COVID-19 has not changed Treaty time limitations

Respecting the pandemic effect on various CRA international programs, CRA indicated:

  • APA and MAP program operations have gradually resumed, and CRA is in contact with its treaty partners using virtual tools such as teleconferencing and, where possible, video-conferencing. Some MAP cases were recently closed using teleconferencing and with no travel. Members of the Transfer-Pricing Review Committee have been meeting using virtual tools such as teleconferencing with secure phone lines.
  • There have been no discussions with our treaty partners to extend treaty time limits. Those are still applicable, and Bill C-20 (the Time Limits and Other Periods Act) does not apply to treaties.
  • If a Treaty has no time-limits itself, then the usual domestic limits apply, for example, under s. 152 – again, subject to any changes provided in Bill C-20, that extend those delays for periods up to six months, but no later than December 31, 2020.
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) no extension under Bill-20 (re COVID) beyond December 31, 2020 47

15 September 2020 IFA Roundtable Q. 3, 2020-0853371C6 - IFA 2020 Q3: Draft IC71-17R6, Paragraph 43

Canada does not negotiate away its application of domestic anti-avoidance rules

Given that both are viewed as domestic anti-avoidance provisions, CRA will follow the same MAP approach to s. 247(2)(b) (the transfer-pricing recharacterization rule) as with s. 245(2) (recharacterization of results under the general anti-avoidance rule), i.e., if it is a primary position of the CRA that 247(2)(b) applies then, as with GAAR assessments, Canada will simply present that position to the other Competent Authority and, if there is double-taxation, seek relief from the other country - rather than giving up the assessment.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(2) - Paragraph 247(2)(b) ss. 247(2)(b) and 245(2) treated the same for MAP procedure purposes 177

16 May 2018 IFA Roundtable Q. 1, 2018-0748181C6 - New U.S. GILTI Tax

Cdn competent authority will not recognize claims that GILTI tax is contrary to Art. VII

The new rules on tax on “global low-taxed intangible income” or “GILTI” in s. 951A of the Code may result in a U.S. corporation being subject to tax on a current basis on active business income earned by a controlled Canadian subsidiary, even if that subsidiary does not have a permanent establishment in the U.S. CRA does not consider that this is contrary to Art. 29 of the Canada-U.S. Treaty, which confirms the rights of the US to impose tax on its own residents, subject to limited exceptions which are inapplicable here.

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 29 Treaty does not fetter the right of the US to impose GILTI tax with reference to Canadian subs’ income 189

13 June 2017 STEP Roundtable Q. 8, 2017-0693381C6 - Single-member disregarded U.S. LLC

no relief under Art. 26(1) of US Treaty re LLC with U.S.-source income and single Canadian-resident member

A single-member disregarded U.S. limited liability company (“SMLLC”), whose member is a resident of Canada, is factually resident in Canada and, thus subject to Part I tax, whereas U.S. source income (e.g., business income from a U.S. permanent establishment) would also be subject to U.S. income tax in the hands of the member, without the SMLLC being entitled to claim any foreign tax credit for such U.S. tax paid by its member. Is there potential redress under Art. XXVI(1) of the Convention, on the basis that, from the U.S. perspective, the member is double-taxed on the same U.S. source income?

CRA indicated that Art. 26(1) would not assist as there is no taxation that is not in accordance with provisions of the Treaty. The answer was the same for U.S. LLPs or LLLPs.

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 29 single member LLC with dual resident member could elect to be C-Corp and S-Corp, and then consider applying for relief under Art. 29(5) 158
Tax Topics - Income Tax Act - Section 125 - Subsection 125(1) 20(12) deduction where LLC with U.S.-source income and single Canadian-resident member - or FTC if U.S. sources of income 182

86 C.R. - Q.38

where the IRS alleges that a U.S. subsidiary overpaid its Canadian parent for goods, it is not necessary to refund the alleged overpayment in order to initiate competent authority negotiations (Article XXVI of U.S. Convention).

80 C.R. - Q.6

Discussion of when RC makes available information concerning agreements.


Martin Marcone, "Resolution Procedures for Intergovernmental Transfer Pricing Disputes: Part 2", 23 Can. Current Tax", Volume 23, Number 12, September 2013:

Taxpayer's discretion in arbitration (p.138)

The MAP [mutual agreement procedure] set out in the Canada-U.S. Treaty above is an example of an arbitral mechanism yielding a binding result only if the taxpayer agrees with it. Arbitration may therefore not end the matter in this framework, as an unsatisfied taxpayer can effectively reject the arbitrator's decision and pursue the matter domestically. By contrast, the MAP set out in the Canada-Ireland Treaty provides that cases may only be submitted for arbitration if the taxpayer agrees in writing to be bound by the decision of the arbitration board.

The OECD Arbitration Model protects the taxpayer's discretion by allowing it to refuse to accept the "mutual agreement that implements the arbitration decision" rather than, for example, setting as a precondition to arbitration the taxpayer's agreement to be bound by the decision. [fn 87: Despite other discretionary features, the tax treaty between Canada and Mexico sets as a condition of arbitration that the taxpayer agrees to be bound by the arbitrator's decision. …] However, as indicated above, a precondition to arbitration is that a court in either country has not ruled upon the unresolved issues. The OECD Model Tax Convention therefore supports a procedure whereby treaty arbitration is engaged only first by a taxpayer, who may then resort to domestic remedies if it is dissatisfied with the result of such arbitration.

Richard G. Tremblay, "Canada-U.S. Treaty Fifth Protocol: Binding Arbitration", Canadian Current Tax, Vol. 18, No. 11, p. 1, August 2008

Discussion of Annex A.

Calderwood, "The Competent Authority Function: A Perspective from Revenue Canada", 1989 Conference Report, c. 39