cross-posted from CitizenshipSolutions dot ca
Dual citizenship, the lack of definition of “Citizen” in the “Savings Clause” of U.S. Tax Treaties and why this is important
The lack of Definition of “citizens” in the “Savings Clause” of U.S. Tax Treaties and why it is important https://t.co/sF7Raa4aib
— Citizenship Lawyer (@ExpatriationLaw) May 29, 2016
This is a “follow up” to my first post about the “Savings Clause” in the Canada U.S. Tax Treaty. The purpose of that first post was to demonstrate that pursuant to the “Savings Clause”, the Government of Canada has agreed to allow the United States to impose direct taxation on some Canadian citizens who are resident in Canada. The post generated a fascinating discussion about the “Savings Clause” and was widely discussed at the Isaac Brock Society. A subsequent post at the Isaac Brock Society provided greater detail about exactly how, and in what respects, the Government of Canada has agreed that the United States can impose direct U.S. taxation on some Canadian citizens and residents. One obvious conclusion from this discussion is reflected in the comment that:
Next time someone tells me that the tax treaty relieves double taxation, I’ll tell them that it causes it. We have RDSP’s and RESP’s to prove it.
I absolutely agree. Although there are a few specific areas where the Tax Treaty mitigates against double taxation, for the most part, because of the Savings Clause, the U.S. Canada Tax Treaty, does NOT prevent double taxation. By ensuring U.S. taxation of Canadian residents and citizens, the U.S. Canada Tax Treaty guarantees double taxation!
It’s a myth that the tax treaty prevents double taxation. As John F. Kennedy said in his
commencement address at Yale University on June 11, 1962: