Tax Treaty Case Law around the Globe 2023

1. Introduction

This case involves a Canadian resident who derived rental income from immovable property situated in France that was effectively exempt from French tax in 2018. When the Canada Revenue Agency included this rental income in computing the taxpayer’s income for Canadian tax purposes, the taxpayer argued that either the rental income was exempt from Canadian tax under Article 6 of the Canada-France Tax Treaty or that he was entitled to a foreign tax credit to prevent double taxation contrary to Article 23 of the treaty.

Article 6 of the Treaty corresponds to Article 6 of the OECD Model Convention and states that income from immovable property “may be taxed in the Contracting State in which such property is situated.” Article 23 of the Treaty is based on Article 23B of the OECD Model Convention, and provides “[s]ubject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada and to any subsequent modification of those provisions (which shall not affect the principle hereof), and unless a greater deduction or relief is provided under the law of Canada,” that “ French tax payable under the la...