Technical Tape Corp. v. MNR, 64 DTC 428 (TAB)

The taxpayer entered into a written agreement for the provision to it in the United States by an American company of technical advice and assistance in consideration for payments of $50,000 per annum (for the first two years of the agreement) and 0.75% of net sales (for the balance of the agreement). Mr. Davis found that the fixed payments were not in the nature of rents or royalty payments, whereas the variable payments were in the nature of royalties for the use of know-how (which was a form of property being used by the taxpayer in Canada.) Accordingly, the latter payments were subject to withholding under s. 106(1) of the pre-1972 Act as "rent, royalty or a similar payment... for the use in Canada of property".

Variable payments made by the taxpayer for the use by it of know-how provided by a U.S. corporation were subject to withholding tax as being "for the use in Canada of property". Mr. Davis noted that in the Rolls-Royce case (40 TC 443), The House of Lords "established that what has come to be known in industry as 'know-how' is undoubtedly an asset, even though it may be an intangible one which never becomes depleted".