AuthorVern Krishna
ProfessionProfessor of Common Law, University of Ottawa Barrister at Law
*Department of Finance def‌init ion
Note: Many def‌initions of accounting terms can be found online at
ww /glossar y.asp.
*Alternative minimum t ax (AMT): A tax levied under the personal in-
come tax to ensure that high-income Canadians claiming preferential
tax deductions pay a reasonable amount of tax in any given year.
Arm’s leng th: Arm’s length generally refers to t he proximity of the rela-
tionship between tax payers. Persons who are related to each other are
considered to be non-arm’s length with each other. An ar m’s-length price
is a price charged in similar transactions bet ween unrelated parties.
Associated enterprises: The concept of associated enterpri ses applies
typically in t ax treaties and encapsulates t he arm’s-length principle. An
enterprise of one contracting st ate may engage in commercial dealings
with an enterpri se of the other contracting state that is under com-
mon control, management or ownership. If the two enterprises deal
under conditions that would not have been imposed on an independ-
ent enterprise, a contracting state may include as taxable prof‌its of the
enterprise amounts t hat would have been derived by the enterprise in
an arm’s-leng th relationship.
*Average tax rate: The ratio of taxes paid to the tax base. Accordingly,
the average income tax rate is the ratio of income ta x paid to income.

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