Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Are FCPs, SICAVs and SICAFs eligible for the benefits of the Canada-Luxembourg Tax Convention?
Position: No.
Reasons: They are not "liable to tax" in Luxembourg.
XXXXXXXXXX 2004-005483
T. Cook
March 29, 2004
Dear XXXXXXXXXX:
Re: Canada-Luxembourg treaty benefits
We are writing in reply to your letter dated December 18, 2003, which requested our opinion as to whether dividends and interest paid by Canadian corporations would be eligible for the reduced withholding tax rates provided by the Canada-Luxembourg Tax Convention (the "Treaty"). The dividends and interest would be paid to Luxembourg investment funds, which could take the following forms:
? fonds commun de placement ("FCP");
? société d'investissement à capital variable ("SICAV"); and
? société d'investissement à capital fixe ("SICAF").
A payment of dividends or interest to a non-resident of Canada is generally subject to withholding tax at the rate of 25% under Part XIII of the Income Tax Act. This tax rate is reduced pursuant to the Treaty if the payment is made to a resident of Luxembourg. Therefore, to benefit from reduced withholding tax rates, the FCP, SICAV or SICAF receiving the payment would have to be a resident of Luxembourg for purposes of the Treaty. And in order to be resident, the FCP, SICAV or SICAF would have to be liable to tax in Luxembourg as required by paragraph 1 of Article 4 of the Treaty.
It has been a long-standing position of the Canada Revenue Agency that FCPs, SICAVs and SICAFs are not "liable to tax" and so are not residents of Luxembourg for purposes of the Treaty. As a consequence, FCPs, SICAVs and SICAFs are not entitled to the benefits of the Treaty. Our position is not unique and in October 2001 Luxembourg published a Note de service (No. II/1425-S38 HE/CG) setting out the positions of its various treaty partners on the entitlement of FCPs, SICAVs and SICAFs to treaty benefits.
We trust that these comments will help you.
Yours truly,
Jim Wilson
Section Manager
for Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Planning Branch
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