Conclusion of Tax Treaty negotiations with China

Beijing, China
9 February 2012

The Government is committed to reducing tax barriers and encouraging increased bilateral trade and investment in order to create conditions for long-term growth and jobs. To this end, Prime Minister Stephen Harper has announced that an agreement in principle had been reached on an updated Canada-China Tax Treaty, which will help promote trade and investment between the two countries.

The existing Canada-China Income Tax Agreement was signed in 1986. Since then, Canada’s tax treaty and domestic tax policies, and internationally-accepted tax treaty standards, have evolved.

The updated Tax Treaty will include modernized provisions that conform to current Canadian and international tax treaty policies, which is based on the Model Tax Convention on Income and on Capital developed by the Organisation for Economic Co-operation and Development (OECD).

More specifically, the updated Tax Treaty will:

  • further reduce tax barriers in order to encourage trade and investment between Canada and China; 
  • reduce the rates of withholding taxes that apply on certain cross-border payments; and
  • eliminate double taxation for individuals and companies doing business or earning income in the other country.

The updated Treaty is subject to approval by the Governments of Canada and China before it can be signed and will enter into force once it has been ratified by both countries.

Canada currently has tax treaties in force with 89 countries. The conclusion of negotiations for an updated Canada-China tax treaty reflects the efforts of the Government of Canada to update and expand its income tax treaty network.

China is Canada’s second largest two-way trading partner.