18 June 2015 STEP Roundtable Q. 9, 2015-0581921C6

Text of Severed Letter

Principal Issues: Are there any non-qualifying countries, and if so is CRA able to provide a list of them?

Position: Response provided by LPD. As of May 6, 2015, the only non-qualifying country is Liberia, which has been a non-qualifying country since February 24, 2015.

Reasons: See below.

STEP CRA Roundtable - June 18 2015

Question 9. Non-Qualifying Country

For the purposes of section 95 of the Income Tax Act, income earned by a foreign affiliate from a business carried on through a permanent establishment in a non-qualifying country is considered to be income earned from a business other than an active business and will thus be included in computing the foreign accrual property income (FAPI) of the foreign affiliate.

A "non-qualifying country" is a country or other jurisdiction with which Canada does not have a tax treaty (including one that has been signed but is not yet in effect), one for which the Convention on Mutual Administrative Assistance in Tax Matters (the MAC) is not in force and effect, or one with which Canada does not have a comprehensive tax information exchange agreement (TIEA), unless Canada has not, more than 60 months before that time, begun or sought by written invitation to enter into negotiations for a TIEA. In effect, a country with which Canada has neither a treaty nor a TIEA and has not ratified the MAC will only be a non-qualifying country if it has failed to enter into a TIEA with Canada within 60 months of being asked to do so or beginning negotiations towards one.

Are there any non-qualifying countries, and if so is CRA able to provide a list of them?

CRA Response

As of May 6, 2015, the only non-qualifying country is Liberia, which has been a non-qualifying country since February 24, 2015.

Finance Canada's website lists Canada's current tax treaties and the jurisdictions with which negotiations to enter into a TIEA have started and those that have been invited to start negotiations along with the relevant dates. The status of jurisdictions participating in the MAC is available on the OECD website.

John Bogdan (for LPD)
2015-058192