Context

Belgium and Canada have recently signed a new double tax treaty. It is expected that this new tax treaty will enter into force on January 1, 2003. With respect to International Employment situations we note that article 15 relating to “Dependant Personal Services”, article 16 relating to “Company Managers” (Directors’ fees) and article 23 relating to the “Elimination of Double Taxation” were amended. In the current headline we will focus on the content of the new article 15. Article 16 and article 23 will be addressed in next headlines.

News

Salaries, wages and remuneration paid to a resident of one State with respect to an employment carried out in the other State are taxable in the latter State, except if three conditions are simultaneously met (the so-called “183 day rule”). Under the new treaty, the first of the three conditions provided by the “183 day rule” requires a period or periods of presence in the other State that in the aggregate does not exceed 183 days in “any twelve month period commencing or ending in the fiscal year concerned”. The wording of the former treaty was “the fiscal year”.

Conclusion

The period of reference for counting the 183 days will thus not be restricted to a given tax year but will be extended to any 12 month period starting or ending in a tax year. For instance, a Belgian resident taxpayer who had been continuously present in Canada from October of one tax year until the end of May of the next tax year, would have been taxed in Belgium under the old treaty provision (except if any of the two other conditions included in the “183 day rule” were not met). Under the new treaty provision, this resident taxpayer would automatically be taxable in Canada.