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Find out how investors benefit from tax treaties between Canada and other countries.
Tax treaties are agreements between two or more countries designed to avoid double taxation and discourage tax evasion. For example, a tax treaty may reduce the amount of tax withheld by the government of one country on income paid to citizens or residents of another country. Businesses operating in more than one country may benefit if tax treaties exist between the countries to prevent double taxation.
Each agreement spells out which taxes are covered and who is eligible to receive the benefits. Sometimes a certificate of residency may be required to qualify.
Example: “To reduce the withholding tax charged on dividends received from his U.S. stocks, Pierre filed a W-8BEN form with the Internal Revenue Service (IRS) to certify that he was not a U.S. citizen and was eligible for a reduced withholding tax under Canada’s tax treaty with the U.S.”
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