🇨🇦 Canada — 🇲🇽 Mexico

Tax Treaty / Double Tax Avoidance Agreement detail

The current Canada-Mexico Income Tax Convention was signed on 12 September 2006, replacing the original 1991 treaty, and entered into force on 12 April 2007 (with withholding reductions applying from 1 January 2008). The treaty is foundational to the trilateral USMCA (formerly NAFTA) economic zone, though it operates as a separate bilateral instrument from the trade agreement. Dividends are subject to a reduced 5% withholding where the beneficial owner is a company controlling at least 10% of the paying company's voting power, and 15% in all other cases. Interest and royalties are each capped at 10%, with full exemptions for government and central-bank interest, export-credit loans of three or more years, and pension-fund interest; copyright and cultural-work royalties are taxable only in the beneficiary's state of residence. The treaty is particularly significant given Canada's large Mexican-born immigrant population and the estimated 1.5 million Canadian snowbirds who winter in Mexico annually, alongside roughly 50,000 permanent Canadian residents. Quebec operates its own provincial tax arrangement with Mexico alongside the federal convention. Both countries have signed the OECD Multilateral Instrument (Canada ratified 2019, Mexico ratified 2023), bringing MLI arbitration provisions into effect for bilateral disputes. A separate Canada-Mexico Social Security Agreement has been in force since 1996, covering totalization of pension entitlements for cross-border workers. Transfer pricing rules in the treaty align with OECD arm's-length standards, and both countries participate in the Common Reporting Standard for automatic exchange of financial account information.