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.
Principal Issues: Where a payor has withheld an amount on account of Part XIII tax, in excess of the amount required, and remitted it to the Receiver General, can the excess amount be re-appropriated to another tax debt of the non-resident payee?
Position: An amount may be re-appropriated to another tax debt of a non-resident payee; however, there is no provisions in the Act that divests a payor from the requirement to withhold. As such, an overpayment could not be re-appropriated to reduce the amount which would have to be withheld in future.
Reasons: Section 215 requires a person who pays an amount to withhold the amount of tax and remit it on behalf of the non-resident to the Receiver General. There is no provision which removes this requirement and therefore, in this instance, there is no debt that "is or may become payable". As such, the provisions of 221.2 are not met.
XXXXXXXXXX
2012-046342
Katharine Skulski
July 18, 2013
Dear XXXXXXXXXX:
Re: Section 221.2
We are writing in response to your letter of September 25, 2012, and subsequent submission of November 1, 2012, together with various telephone conversations (Skulski/XXXXXXXXXX) inquiring as to whether the Minister would exercise her discretion under section 221.2 in a particular set of facts. We apologize for the delay in responding.
You have explained that a Canadian resident subsidiary paid dividends to its non-resident parent during taxation years which are now statute barred. At the time that the subsidiary paid the dividend, it withheld an amount on account of Part XIII tax and remitted it to the Receiver General. The subsidiary and parent later realized that the subsidiary had been withholding amounts from the dividend at a rate that was higher than the treaty agreed rate. You have further explained that by the time the error was discovered, the parent could not request a refund pursuant to subsection 227(6). As such, you have asked whether or not a re-appropriation of the overpayment could be made pursuant to section 221.2.
Written confirmation of the tax implications of particular transactions is provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, "Advance Income Tax Rulings", dated May 17, 2002. This Information Circular and other CRA publications can be accessed on the internet at http://www.cra-arc.gc.ca/formspubs/menu-e.html. Where a request concerns a completed transaction, then a review of the relevant facts and circumstances surrounding the situation would be required. Such review would only be conducted by the applicable Tax Services Office during the course of an audit. If such audit is undertaken, it would be carried out after the particular taxpayer has prepared and filed its income tax return for the year. However, we are prepared to provide the following comments that may be of assistance.
Unless otherwise stated, all statutory references in this letter are to the Income Tax Act, R.S.C. 1985, c. 1 (5th Suppl.) (the "Act"), as amended to the date hereof.
Subsection 221.2 generally provides that where an amount has been appropriated to a debt of the taxpayer, the whole or part of such amount may be re-appropriated to another debt of the taxpayer that is or may become payable. As such, where a non-resident has overpaid Part XIII tax, the amount overpaid may be an amount available to be re-appropriated to another debt of the payee.
Subsection 215 provides that a payor is required to withhold Part XIII tax on certain amounts that it pays to a non-resident payee and to remit the amount to the Receiver General. There is no provision in the Act that divests the payor of this requirement. As such, unless the non-resident payee has tax liabilities from amounts payable arising from other sources, the non-resident payee will not have a debt that "is or may become payable" for the purposes of subsection 221.2.
We trust that these comments will be of assistance.
Yours truly,
Terry Young, CA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2013
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2013
Email this Content