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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Dear Sirs:
This is in reply to your letter of January 28, 1985 concerning the taxation of payments made by certain Canadian cable operators to a network ("Network") resident and carrying on business in the United States. We regret the delay in our reply.
The payments, made pursuant to an affiliation agreement between the Network and the cable operators, are for a daily program of video entertainment and cultural programming along with commercial announcements put together by Network. The daily program is transmitted by satellite to the cable operators who then make it available to their pay t.v. subscribers. The amount due to Network is payable monthly by the operator and is based on the number of its subscribers who receive the Network programming during the month. Network has no permanent establishment in Canada for purposes of either the 1942 or the 1980 Canada U.S. Income Tax Convention.
You are of the view that all these payments to Network by the cable operators are not subject to withholding tax pursuant to Part XIII of the Income Tax Act.
We disagree. In our view, these payments are subject to withholding taxes pursuant to subsection 212(5) of the Income Tax Act. However, pursuant to Article XIIIC of the 1942 Convention and Article XXX of the 1980 Convention, payments made before Network's first taxation year beginning on or after January 1, 1986 will be exempt from withholding tax, except any portion of the payments that are in respect of programming based on motion picture films. To the extent that the payments are in respect of programming based on motion picture films, the withholding tax is limited to 15% pursuant to Article XI of the 1942 Convention. The Part XIII withholding tax on payments made to Network after that time will be reduced to 10% pursuant to Article XII of the 1980 Convention.
We trust these comments will be of assistance.
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