Tax Treaty Case Law around the Globe 2014

S. 85Chapter 8 Canada: Judicial Review of Taxpayer's Request for Competent Authority Assistance under Canada-United States Tax Treaty

David G. Duff

8.1. Introduction

Where a contracting state makes a transfer pricing adjustment in accordance with article 9(1) of the OECD Model, article 9(2) stipulates that the other state shall make an appropriate adjustment to eliminate the economic double taxation that would otherwise result if profits allocated to one enterprise by the transfer pricing adjustment are also included in the profits of the related enterprise. In addition to this provision, article 25 establishes a mutual agreement procedure (MAP) through which the competent authorities shall endeavour by mutual agreement to resolve issues in the application of the Convention, including situations in which the actions of one or both of the contracting states results or will result in taxation not in accordance with the provisions of the Convention. Similar provisions appear in articles IX(3) and XXVI of the Canada-United States Tax Convention (the Treaty), although article IX(3) applies only if the other state agrees with the initial transfer pricing adjustment and also includes a requiremen...