At the moment of signing the Convention for the avoidance of double taxation, and the establishment of rules of reciprocal administrative assistance in the case of income taxes, this day concluded between the United States of America and Canada, the undersigned plenipotentiaries have agreed upon the following provisions and definitions:
- The taxes referred to in this Convention are:
(a) for the United States of America: the Federal income taxes, including surtaxes, and excess-profits taxes.
(b) for Canada: the Dominion income taxes, including surtaxes, and excess-profits taxes.
- In the event of appreciable changes in the fiscal laws of either of the Contracting States, the Governments of the Contracting States will consult together.
- As used in this Convention:
(a) the terms “person”, “individual” and “corporation”, shall have the same meanings, respectively, as they have under the revenue laws of the taxing State or the State furnishing the information, as the case may be;
(b) the term “enterprise” includes every form of undertaking, whether carried on by an individual, partnership, corporation or any other entity;
(c) the term “enterprise of one of the Contracting States” means, as the case may be, “United States enterprise” or “Canadian enterprise”;
(d) the term “United States enterprise” means an enterprise carried on in the United States of America by an individual resident in the United States of America, or by a corporation, partnership or other entity created or organized in or under the laws of the United States of America, or of any of the States or Territories of the United States of America;
(e) the term “Canadian enterprise” is defined in the same manner, mutatis mutandis, as the term “United States enterprise”;
(f) the term “permanent establishment” includes branches, mines and oil wells, farms, timber lands, plantations, factories, workshops, warehouses, offices, agencies and other fixed places of business of an enterprise, but does not include a subsidiary corporation.
When an enterprise of one of the Contracting States carries on business in the other Contracting State through an employee or agent established there, who has general authority to contract for his employer or principal or has a stock of merchandise from which he regularly fills orders which he receives, such enterprise shall be deemed to have a permanent establishment in the latter State.
The fact that an enterprise of one of the Contracting States has business dealings in the other Contracting State through a commission agent, broker or other independent agent or maintains therein an office used solely for the purchase of merchandise shall not be held to mean that such enterprise has a permanent establishment in the latter State.
- The term “Minister”, as used in this Convention, means the Minister of National Revenue of Canada or his duly authorized representative. The term “Commissioner”, as used in this Convention, means the Commissioner of Internal Revenue of the United States of America, or his duly authorized representative. The term “competent authority”, as used in this Convention, means the Commissioner and the Minister and their duly authorized representatives.
- The term “United States of America”, when used in a geographical sense, includes only the States, the Territories of Alaska and Hawaii, and the District of Columbia. The term “Canada”, when used in a geographical sense, means the Provinces, the Territories and Sable Island.
- The term “subsidiary corporation” referred to in Article XI of this Convention means a corporation all of whose shares (less directors’ qualifying shares) having full voting rights are beneficially owned by another corporation, provided that ordinarily not more than one-quarter of the gross income of such subsidiary corporation is derived from interest and dividends other than interest and dividends received from its subsidiary corporations.
(a) The term “rentals and royalties” referred to in Article II of this Convention shall include rentals or royalties arising from leasing real or immovable, or personal or movable property or from any interest in such property, including rentals or royalties for the use of, or for the privilege of using, patents, copyrights, secret processes and formulae, goodwill, trade marks, trade brands, franchises and other like property;
(b) the term “interest”, as used in this Convention, shall include income arising from interest-bearing securities, public obligations, mortgages, hypothecs, corporate bonds, loans, deposits and current accounts;
(c) the term “dividends”, as used in this Convention, shall include all distributions of the earnings or profits of corporations.
- The term “pensions” referred to in Article VI of this Convention means periodic payments made in consideration for services rendered or by way of compensation for injuries received.
- The term “life annuities” referred to in Article VI of this Convention means a stated sum payable periodically at stated times, during life, or during a specified number of years, under an obligation to make the payments in consideration of a gross sum or sums paid by the recipient or under a contributory retirement plan.
- The terms “engaged in trade or business” and “office or place of business” as used in Article XI of this Convention shall not be deemed to include an office used solely for the purchase of merchandise.
- The provisions of the present Convention shall not be construed to restrict in any manner any exemption, deduction, credit or other allowance accorded by the laws of one of the Contracting States in the determination of the tax imposed by such State.
- The citizens of one of the Contracting States residing within the other Contracting State shall not be subjected to the payment of more burdensome taxes than the citizens of such other State.
Done in duplicate, at Washington, this fourth day of March, 1942.