Glossary

• Author: Vern Krishna
• Profession: Professor of Common Law, University of Ottawa Barrister at Law
• Pages: 679-688

679

GLOSSARY

*Department of Finance def‌init ion

Note: Many def‌initions of accounting terms can be found online at

ww w.ventureline.com /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.