After more than two years of negotiations, Canada and the United Kingdom signed a protocol to amend a tax treaty between the two countries that adds a new “exchange of information” provision and a new clause that would allow a tax authority from one country to “enter the other” to conduct tax audits.
The 12-page protocol, which came into force just before the Christmas holidays, permits an authorized tax representative from the U.K. to enter in Canada to interview individuals or even examine a person’s books and records.
“It used to be that foreign tax debt was viewed as essentially not enforceable in other countries so absent a law imposed through the enactment of a treaty, the Canadian courts would by and large not assist a foreign government in collecting from a Canadian resident,” pointed out Charles Taylor, a partner with Deloitte. “Now, as governments are intent on preventing fiscal evasion, they have agreed to help each other and we have a provision in the protocol that essentially says the two governments will assist in the collection of taxes covered by the convention.”