Protocol
Amending the Convention Between Canada and the United States of
America with Respect to Taxes on Income and on Capital Signed at
Washington on September 26, 1980 as Amended by the Protocols Signed
On June 14, 1983, March 28, 1984 and March 17, 1995 (Fourth Protocol)
1. Paragraph
3(a) of Article XIII (Gains) of the Convention shall be deleted
and replaced by the following:
"(a) In the case of real property situated
in the United States, means a United States real property interest
and real property referred to in Article VI (Income from Real
Property) situated in the United States, but does not include
a share of the capital stock of a company that is not a resident
of the United States; and"
2. Paragraph
3(b)(ii) of Article XIII (Gains) of the Convention shall be
deleted and replaced by the following:
"(ii) A share of the capital stock
of a company that is a resident of Canada, the value of whose
shares is derived principally from real property situated
in Canada; and"
1. Paragraph
3 of Article XVIII (Pensions and Annuities) of the Convention
shall be deleted and replaced by the following:
"3. For the purposes of this Convention,
the term "pensions" includes any payment under a superannuation,
pension or other retirement arrangement, Armed Forces retirement
pay, war veterans pensions and allowances and amounts paid under
a sickness, accident or disability plan, but does not include
payments under an income-averaging annuity contract or, except
for the purposes of Article XIX (Government Service), any benefit
referred to in paragraph 5."
2. Paragraph
5 of Article XVIII (Pensions and Annuities) of the Convention
shall be deleted and replaced by the following:
"5. Benefits under the social security
legislation in a Contracting State (including tier 1 railroad
retirement benefits but not including unemployment benefits) paid
to a resident of the other Contracting State shall be taxable
only in that other State, subject to the following conditions:
(a) a benefit under the social security
legislation in the United States paid to a resident of Canada
shall be taxable in Canada as though it were a benefit under
the Canada Pension Plan, except that 15 per cent of the amount
of the benefit shall be exempt from Canadian tax; and
(b) a benefit under the social security
legislation in Canada paid to a resident of the United States
shall be taxable in the United States as though it were a benefit
under the Social Security Act, except that a type of benefit
that is not subject to Canadian tax when paid to residents of
Canada shall be exempt from United States tax."
1. This Protocol shall be subject to ratification
in accordance with the applicable procedures in Canada and the United
States and instruments of ratification shall be exchanged as soon
as possible.
2. This Protocol shall enter into force upon
the exchange of instruments of ratification, and shall have effect
as follows:
(a) Article
1 of this Protocol shall have effect as of April 26, 1995;
and
(b) Article 2 of this Protocol shall have
effect with respect to amounts paid or credited to a resident
of the other Contracting State after 1995, except that where a
Contracting State has, in accordance with the Convention read
without reference to this Protocol, imposed a tax on benefits
paid or credited under the social security legislation in that
State, and those benefits are paid or credited after 1995 and
(i) before the calendar year in which this
Protocol enters into force, if this Protocol enters into force
before September 1 of that year, or
(ii) before the end of the calendar year
in which this Protocol enters into force, if this Protocol enters
into force after August 31 of that year, Article 2 shall only
have effect with respect to such benefits (referred to in this
Article as "source-taxed benefits") as described in
paragraphs 3, 4 and 5.
3. With respect to source-taxed benefits paid
by a Contracting State to a resident of the other Contracting State,
Article 2 applies only if the resident has, within three years after
the date on which this Protocol enters into force, applied to the
competent authority of the first-mentioned Contracting State for
a refund of the tax imposed on the benefits. However, with respect
to source-taxed benefits paid by the United States to a resident
of Canada, the competent authority of Canada shall:
(a) apply for and receive such refund on behalf
of the resident;
(b) remit to the resident, in accordance with
the law of Canada governing refunds of income tax overpayments,
such refund less any tax imposed in Canada on the benefits in
accordance with Article 2 of this Protocol; and
(c) make the application referred to in subparagraph
(a) only if the additional tax that would be imposed in Canada
on the benefits, on the assumption that Article 2 of this Protocol
applied, would be less than the tax imposed in the United States
on the benefits as a result of paragraph 5 of Article XVIII (Pensions
and Annuities) of the Convention read without reference to this
Protocol.
4. All taxes refunded as a result of this Protocol
shall be refunded without interest and interest on any taxes of
a resident of a Contracting State assessed as a result of this Protocol
shall be computed as though those taxes became payable no earlier
than December 31 of the year following the year in which this Protocol
enters into force.
5. The competent authorities of the Contracting
States shall establish procedures for making or revoking the application
referred to in paragraph 3 and shall agree on such additional procedures
as are necessary to ensure the appropriate implementation of this
Protocol.
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