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HMRC internal manual

Double Taxation Relief Manual

Double Taxation Relief Manual: Guidance by country: Canada: Treaty Summary

The table summarises the provisions of the treaty as they relate to income beneficially owned by UK residents. The rate shown is the ‘treaty rate’ and does not reflect taxes chargeable under domestic law before relief is given under the provisions of the treaty. The ‘treaty rate’ is the maximum rate at which Canada is permitted to tax income in the relevant categories under the treaty. Rates chargeable under domestic law may be higher or lower.

In all cases other conditions for relief (e.g. beneficial ownership) will have to be met before relief is due under the treaty. The text of the treaty itself should be consulted for the full details. The text of the treaty can be found on gov.uk.

 

Portfolio dividends 15% (note 1) Article 10
     
Dividends on direct investments 5% (note 1) Article 10
Conditions for lower rate on dividends on direct investments The beneficial owner must be a  company which controls, directly or indirectly, at least 10 % of the voting power in the company paying the dividends Article 10
Interest 10% (note 2) Article 11
Royalties 10% (note 3) Article 12
Government pensions Taxable only in the UK Article 17
Other pensions Taxable only in the UK Article 17
Arbitration Yes (note 4) Article 23

 

Note 1: From 2015, dividends beneficially owned by a recognized pension plan are taxable only in the state in which the pension plan is resident.

Note 2:  Interest paid in the following circumstances is taxable only in the state of residence of the beneficial owner of the interest:

  • interest arising in Canada and paid to a resident of the UK in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the United Kingdom Export Credits Guarantee Department.
  • interest arising in Canada and paid to a resident of the UK if the beneficial owner is dealing at arm’s length with the payer (certain instruments are excluded from this exemption – see paragraph 4 of Article 11)

Note 3: Royalties paid in the following circumstances are taxable only in the state of residence of the beneficial owner of the Royalty:

  • copyright royalties and other like payments in respect of the production or reproduction of any literary, dramatic, musical or artistic work (other than payments in respect of motion pictures, and payments in respect of works on film, videotape or other means of reproduction for use in connection with television broadcasting).
  • payments for the use of, or the right to use, any patent or for information concerning industrial, commercial or scientific experience (but not including any such payment provided in connection with a rental or franchise agreement).
  • payments for the use of, or the right to use, computer software.

Note 4: The provisions on arbitration were inserted into the treaty by the 2014 protocol and take effect from 21 December 2016, when the 2015 Exchange of Notes entered into force.