811.512342 Double/18

The Canadian Legation to the Department of State


There is attached hereto a revised draft of the proposed fiscal agreement or convention between the Governments of Canada and the United States.15

This draft is identical with the United States draft which was handed to the Canadian Minister on November 27th, with the following exceptions:

There have been added a preamble, an article providing for ratification, and a concluding clause.
There has been added at the conclusion of Clause (a) of Article I language intended further to clarify the persons covered by this clause. There are persons resident in Canada who are members of trusts and partnerships, which are not composed entirely of residents of Canada, but which may include either residents of the United States or residents of other countries. The clause (a) as drafted seems to be somewhat ambiguous in so far as their treatment is concerned. The clause is very properly intended to draw a distinction between the individual as such and the individual regarded as a member of a trust or partnership. The revision submitted is designed to remove ambiguity, and to make this point clear. Such an individual, in so far as he was a member of the trust or partnership, would be subject to the higher rate of taxation, but would, regarded as an individual and in respect of his holdings as such, be entitled to the five per cent. rate. A similar result would be reached in the many instances in which United States Citizens are members of ordinary international firms or partnerships on the one hand, or international firms or partnerships including Canadian members. They would be treated by the Canadian fiscal authorities as having two severable capacities.

It is hoped that this addition to the United States draft will meet with approval, and that the agreement may be signed in the near future.

[For text of the convention between the United States and Canada, signed December 30, 1936, see Department of State Treaty Series No. 920, or 50 Stat. 1399.]

  1. Draft not printed. It is essentially the same as the convention signed on December 30, 1936, except that the sentence at the conclusion of clause (a) of article I of the draft does not appear in the signed convention. The sentence reads: “The term ‘persons’ as used in this paragraph means individuals, fiduciaries, and partnerships (composed entirely of residents of the other contracting State), and includes individuals in their personal capacities and in respect of their personal incomes, notwithstanding that they are members of fiduciaries or partnerships which are not composed entirely of residents of the other contracting State or which are engaged in trade or business in the contracting State.”