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.
Principal Issues: Treatment of payments re: cross-currency swap
Position: Confirmed that replies to q. 60 at 1984 Round Table continue to reflect our position
Reasons: No change to position
XXXXXXXXXX 2000-003604
J. P. Dunn
Attention: XXXXXXXXXX
August 25, 2000
Dear Sirs:
Re: Cross-Currency Swap Agreements
We are writing in response to your correspondence of July 5, 2000 in which you had requested the views of Canada Customs and Revenue Agency regarding the treatment, for income tax purposes, of the various payments made pursuant to a cross-currency swap agreement.
Most of your queries were addressed in Question 60 of the 1984 Revenue Canada Round Table to which you had referred. The responses provided therein continue to reflect our position. With respect to your other questions, if the periodic payments to a counterparty do not constitute interest, paragraph 212(1)(b) of the Act would not be applicable to subject those payments to withholding tax. Also, the gain realized or the loss incurred on the termination of the swap agreement would be considered to be on the same account as that realized on the settlement of the debt i.e. on account of either income or capital.
We would also note that the views expressed herein regarding the treatment of the payments pursuant to the swap agreement would prevail regardless of whether the interest expense on the foreign currency denominated loan was, or was not, deductible for income tax purposes by the Canadian borrower.
We trust that this is the information which you require.
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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