Glossary

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

679

GLOSSARY

*Department of Finance def‌inition

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

www.ventureline.com /glossar y.asp.

*Alternative minimum tax (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 length: Arm’s length generally refers to the proximity of the rela-

tionship between taxpayers. 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 between unrelated parties.

Associated enterprises: The concept of associated enterprises applies

typically in t ax treaties and encapsulates t he arm’s-length principle. An

enterprise of one contracting state may engage in commercial dealings

with an enterprise 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 that would have been derived by the enterprise in

an arm’s-length relationship.

*Average tax rate: The ratio of taxes paid to the tax base. Accordingly,

the average income tax rate is the ratio of income tax paid to income.