Advisory Panel on Canada's System of International Taxation

Table of Contents

Copyright Notice

Transmittal Letter

Acknowledgments

1. Introduction

Our mandate

Our approach

2. Our Current Environment

Introduction

Tax policy and cross-border investment

Benefits of foreign inbound and outbound direct investment to Canada

Looking forward

3. Principles for Guiding Canada’s International Tax Policy

Introduction

Competitive tax system for Canadians investing abroad

Level playing field for domestic business activity

Protecting the tax base

Straightforward tax rules

Open consultation

Regular benchmarking

Implementing the principles

Our recommendations

4. Taxation of Outbound Direct Investment

Introduction

Canada’s current system

Assessing Canada’s treatment of foreign active business income

Foreign accrual property income and Canada’s anti-deferral regimes

Expenses incurred to earn foreign-source income

5. Taxation of Inbound Direct Investment

Introduction

Interest expense incurred by foreign-owned Canadian businesses

Treaty shopping

6. Non-Resident Withholding Taxes

7. Administration, Compliance and Legislative Process

Introduction

Enhancing mutual responsibility and cooperation

Resources for administering the international tax system

Transfer pricing administration

Waivers from withholding tax obligations under regulations 102 and 105

Taxable Canadian property

Legislative process

Information management

8. Looking Ahead

Introduction

Source-based taxation

Neutrality among substitutable economic returns

Tax consolidation

Appendix A  List of Recommendations

Taxation of outbound direct investment

Taxation of inbound direct investment

Non-resident withholding taxes

Administration, compliance and legislative process

Appendix B  Technical Issues for Further Study

Taxation of outbound direct investment

Certification for withholdings under regulations 102 and 105

Providing investment advisory services to non-residents

Appendix C  Taxation of Foreign-source Income — Revisiting the Other Alternatives

Accrual or Worldwide Basis of Taxation

Credit Method

Appendix D  Biographical Notes

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