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Unformatted text preview: test is a binary test, meaning that either the test is satisfied and treaty benefits are available, or the test is not satisfied and treaty benefits are not available. Failure to meet the “at least as low as” test seems to result in the complete loss of all treaty benefits, a result that is neither necessary nor appropriate. at the 2008 iFa seminar, the Cra confirmed that this is simply the way the test works.59 a number of us treaties include “at least as low as” tests within their derivative benefits provision. Therefore, precedent already exists. 57 article xxix a(4)(a)(ii). 58 The protocol eliminates withholding tax on interest between arm’s-length and non-arm’slength parties. because the protocol came into force on December 15, 2008, the rate is reduced to 4 percent effective January 1, 2009; after January 1, 2010, the rate is further reduced to 0 percent. Withholding tax on most arm’s-length interest was effectively eliminated in Canada by domestic changes that took effect January 1, 2008. 59 supra note 17. 110 n c anadian tax journal / revue fiscale canadienne ( 2009) vol. 5 7 , n o 1 C aPITal gaINs: C aNadIaN suBsIdIarIes
held By us-resIdeNT ComPaNIes
Many foreign-owned us companies are not qualifying persons. as a consequence, to qualify for treaty benefits, these companies must rely on the exceptions in either the active trade or business test or the derivative benefits test. reliance on these exceptions raises serious concerns when a capital gain is...
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