Principal Issues: 1. Whether the rate of Branch tax is reduced under the Canada-Ireland Treaty. 2. Whether Canada's corporate income tax rate is the same for a Canadian resident corporation as for a non-resident corporation.
Position: 1. Yes 2. Yes
Reasons: Article 10(6) of the Canada-Ireland Treaty restricts the rate of Part XIV tax that can be imposed and both resident and non-resident corporations carrying on business in Canada are subject to the same general corporate rates of Part 1 tax.
September 13, 2012
XXXXXXXXXX
Dear XXXXXXXXXX:
The office of the Honourable James M. Flaherty, Minister of Finance, forwarded me a copy of your correspondence concerning whether the rate of Branch tax imposed in Canada is reduced under the Canada-Ireland Income Tax treaty, and whether Canada’s corporate income tax rates are the same for a Canadian resident corporation as for a non-resident corporation.
Where Article 10(6) of the treaty applies, the maximum rate of Branch tax that can be imposed under section 219 of the Income Tax Act is 5%. A non-resident corporation may also be eligible under the same Article for an exemption on the first $500,000 of cumulative earnings attributable to its Canadian permanent establishment. This exemption must be shared between the corporation and all of its associated corporations.
Both Canadian resident and non-resident corporations carrying on business in Canada are subject to the same general corporate rates of Part I tax under the Act. You may find the Government of Canada’s Part 1 tax rates and all corresponding provincial rates on the Canada Revenue Agency website at http://www.cra-arc.gc.ca/tx/bsnss/tpcs/crprtns/rts-eng.html.
I trust that the information I have provided is helpful.
Yours sincerely,
Gail Shea, P.C.,M.P.
Minister of National Revenue
2012-0458841M4
Hooey, Kathy