Canada U.S. Treaty - Fifth Protocol, Approved by US Senate!?

jhuang1213 · Post by **jhuang1213** » Wed Nov 26, 2008 12:19 pm

While surfing US Senate website, under "Approved Treaties by current Senate Session", I found following:
---------------------------------

Protocol Amending the Convention Between the United States of America and Canada
with Respect to Taxes on Income and on Capital done at Washington on September 26,
1980, as Amended by the Protocols done on June 14, 1983, March 28, 1984, March 17,
1995, and July 29, 1997, signed on September 21, 2007, at Chelsea (the "proposed
Protocol").
Sep 23, 08 Resolution of advice and consent to ratification agreed to in
Senate by Division Vote.
--------------------------------------------
Does this mean the protocal now part of law and we can apply it to our 2008 return (especially the new rule on 401K and/or RRSP contribution)? Any comments?

nelsona · Post by **nelsona** » Wed Nov 26, 2008 12:44 pm

No. It is not approved yet.

And, I believe, even when approved, most articles would only take effect on the FOLLOWING january 1st.

A good place to watch is the finance canada site, which as of yesterday states that it is not yet in force;

http://www.fin.gc.ca/treaties/treatysta ... tml#status

A tax man · Post by **A tax man** » Mon Dec 15, 2008 11:45 pm

The Department of Finance confirmed that the Treaty Protocols are now in force as of December 15 2008. Check the link that nelsona provided above for more info.

cfn2007 · Post by **cfn2007** » Thu Dec 18, 2008 7:26 am

So the new protocol should be in effect as of Jan 1, 2009. This would mean, for example, Roth income needs to be declared in Canada for 2008 but not for 2009, right?

nelsona · Post by **nelsona** » Thu Dec 18, 2008 8:05 am

The new treaty takes effect in jan, correct.

However, Roth holders in Canada should have been taking a 'treaty exception' for several years now to avoid declaring the income.

You haven't been doing this?

cfn2007 · Post by **cfn2007** » Thu Dec 18, 2008 8:47 pm

"However, Roth holders in Canada should have been taking a 'treaty exception' for several years now to avoid declaring the income.

You haven't been doing this?"

I've never heard of this "treaty exception" you're referring to. Of course, I just got off the boat last year so we're only talking 1 year of Roth earnings.

How do i get with the program for 2008? Is there a form I need to fill out?

nelsona · Post by **nelsona** » Fri Dec 19, 2008 4:17 am

Cdn residents with Roths have been notifying CRA, by letter, that they wish to defer taxation on their yearly Roth income by invoking Article XVIII(7) of the old treaty.

While, until now, Roths were not considered retirement accounts, CRA was permitting deferral until one withdrew funds, at which time tax would be owing from the proceeds.

this is obviated by the new treaty.

wimzieguy · Post by **wimzieguy** » Mon Dec 22, 2008 10:46 am

Reading CRA website (via link provided by Nelsona), I noticed the following:

"The Protocol will have effect as per the provisions contained in Article 27 of the Protocol."

Article 27 => This Protocol shall enter into force on the date of the later of the notifications referred to in paragraph 1, or January 1, 2008, whichever is later.

Does this mean that RRSP's and IRA's are now mutually recongnisable starting Jan 1st, 2008? or Dec 15th, 2008?

nelsona · Post by **nelsona** » Mon Dec 22, 2008 2:31 pm

... and, if you read on, it states

"In respect of other taxes, for taxable years that begin after ... the calendar year in which this Protocol enters into force"

So, as I said earlier, the protocol entered into force in 2008, so the these provisions take effect Jan 01, 2009.

wimzieguy · Post by **wimzieguy** » Thu Jan 15, 2009 11:42 am

Nelsona,

As per Serbinski accounting firm, this appears to come into effect starting Jan 1st, 2008 (see link below)

http://forums.serbinski.com/viewtopic.php?t=3175

Any comments?

Thanks.

AK

nelsona · Post by **nelsona** » Thu Jan 15, 2009 12:49 pm

he made a mistake.

nelsona · Post by **nelsona** » Thu Jan 15, 2009 1:18 pm

I've already stated when these provisions take effect, and I've determined this by studying the releases provided by tax firms and lawyers.

For example:

http://www.dwpv.com/en/17620_23110.aspx

which states:
"With some notable exceptions (discussed below), the provisions of the Protocol relating to taxes withheld at source apply to amounts paid or credited after February 1, 2009 while in respect of other taxes the Protocol is effective for taxable years beginning January 1, 2009 or later."

There was no special timing on the pension aspects, so it falls under the "other taxes" category of the protocol: which means 2009 taxation year or after.