🇨🇦 Canada — 🇬🇧 United Kingdom

Tax Treaty / Double Tax Avoidance Agreement detail

The Canada–United Kingdom Double Taxation Convention was signed on 8 September 1978 and entered into force on 17 December 1980, replacing an earlier 1966 agreement. The treaty has been substantially updated through protocols in 1980, 1985, 1995, and most recently 2014, with the 2014 protocol introducing binding arbitration provisions for unresolved competent authority disputes. Both Canada and the UK signed the OECD Multilateral Instrument (MLI) and the MLI modifications became effective for this treaty from 2020, adding principal purpose test (PPT) anti-avoidance provisions and updating the dispute resolution framework. Withholding tax on dividends is set at 5% where the beneficial owner is a company holding at least 10% of the voting power of the paying company, and 15% in all other cases. Interest payments between residents of the two countries are subject to a maximum 10% withholding tax, with exemptions for government and central bank interest. Royalties are taxed at 0% for copyright royalties on literary, dramatic, musical, or artistic works (excluding films and similar media) and 10% for other royalties including patents and industrial know-how. The treaty is particularly significant for the approximately 400,000 British expatriates residing in Canada and a comparable Canadian community in the United Kingdom, making it one of the more heavily utilised UK bilateral tax treaties. Social security coordination is governed separately by the 1959 Canada–UK Social Security Agreement, updated by a 1995 protocol, which coordinates Canada Pension Plan and UK State Pension entitlements and prevents dual social security contributions for cross-border workers. Both countries participate in the Common Reporting Standard (CRS) for automatic exchange of financial account information. The UK–Canada Trade Continuity Agreement governs bilateral trade arrangements post-Brexit, but tax matters remain governed exclusively by this convention and its protocols.