CRA characterizes referral fees as royalties rather than business profits

CRA considers that customer referral fees paid by a Canadian insurance broker to a US insurance broker likely should be characterized as payments for "information concerning... commercial... experience," so that the withholding tax that otherwise would apply under s. 212(1)(d)(ii) will be relieved by the Royalties Article of the Canada-US Income Tax Convention.

Neal Armstrong.  Summary of 21 September 2012 T.I. 2012-0457951E5 under Treaties - Art. 12 and s. 212(1)(d)(ii).