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.
Dear Sir:
This is to reply to your letter of June 4, 1984 relating to the above-captioned matter.
You have asked for our comments concerning the applicability of withholding tax to amounts recovered in Canada for the unauthorized use of copyrights belonging to a non-resident person. You wish us to consider court awarded compensation and out of court settlements and, in particular, the applicablility of Article XIIIC of the Canada-U.S. Convention which is currently in force or the exemption contained in subparagraph 212(1)(d)(vi) of the Act to such payments paid or credited the non-resident person.
As indicated in XXX letter to you of 26 April 1984, the expression use' in subparagraph 212(1)(d)(i) of the Act is broad enough to encompass unauthorized or wrongful use. Accordingly, court awarded damages or out of court settlements designed to compensate copyright owners for the wrongful misappropriation of their copyright property are subject to tax by virtue of subparagraph 212(1)(d)(i) of the Act.
XXX
In our view, neither subparagraph 212(1)(d)(vi) of the Act nor Article XIIIC of the Canada-U.S. Convention will operate to exempt from tax awards of damages or payments pursuant to out of court settlements made in connection with the wrongful misappropriation of copyrights, since both provisions refer to payments made pursuant to the terms of consensual agreements. In this regard, we do not consider that a subsequent out of court settlement operates retroactively to make the payments “for the right to use copyrights”, regardless of whether the settlement agreement expressly so provides.
We trust that the foregoing provides the clarification you desire.
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