By Stewart Lewis
(September 18 – 14:15 ET) – Canadian and United States negotiators have agreed to recommend changes to the Canada-U.S. income tax treaty which will soften the tax blow on each other’s emigrants.
“If approved by the legislatures of the two countries, these changes will make the tax system fairer by limiting the potential for double taxation of individuals who move from one country to another, and by clarifying a rule that some have argued allows corporations to avoid paying tax,” says Canada’s finance minister, Paul Martin.
Canada and the United States “have agreed that these particular initiatives are important for international mobility, and should take effect right away.”
For individuals, the changes will ensure the appropriate tax treatment of an emigrant’s gains, says the Finance Department:
- if one country’s tax department treats an individual as having disposed of a property immediately before the individual emigrates to the other country, the individual should be able to move to the destination-country without paying tax on any pre-emigration gain; and
- when tax is payable in the destination country — for example, where the property in question is real estate situated in that country — the new rule will ensure appropriate tax crediting. The property will have been deemed to be sold and re-acquired at fair market value
If approved, the rule for individuals will apply to changes in residence that take place on and after today’s date.