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.
Ms. C.J. Muirhead, Chief, Non-Residents & Business
& Property Income Section, Non-Corporate Rulings & Publications Directorate, Legislation Branch, Revenue Canada, Taxation, 88 Metcalfe Street, Ottawa, Ontario K1P 5L7
Dear Ms. Muirhead:
By this letter, we are requesting confirmation from you of our telephone conversation of late last week with respect to the interaction of the Income Tax Conventions Interpretation Act and the Canada-U.S. 1980 Tax Convention.
Section 6 of the Income Tax Conventions Interpretation Act provides that the term "interest" does not include guarantee fees referred to in Paragraph 214(15) (a) of the Income Tax Act with respect to tax conventions entered into by Canada before November 19, 1974 if the guarantee fee was made pursuant to an agreement entered into before June 23, 1983. The greater relief provisions of the Canada-U.S. 1980 Tax Convention as contained in Paragraph 5 of Article XXX state that the 1942 convention applies for the first taxable year to which the provisions of the 1980 convention would otherwise have applied if such application of the 1942 convention would provide greater relief from tax. In addition, Paragraph 6 of Article XXX provides that the 1942 convention shall terminate on the last date on which it has effect in accordance with, among other things, Paragraph 5.
Paragraph 4 of Article XI states that interest includes "income assimilated to income from money lent by the taxation laws of the contracting state in which the income arises". This would appear to include guarantee payments.
Assuming that a Canadian taxable corporation has a December 31 year-end and makes guarantee payments to the United States, we would ask that you confirm that Canadian non-resident withholding tax would not apply to such payments until 1986.
We appreciate your attention to this matter and if you have any questions, please do not hesitate to contact the writer.
Yours faithfully,
XXXX
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