Principal Issues: Whether paragraph 212(1)(d) applies to a payment made by a corporation resident in Canada (the "Taxpayer") to a non-resident of Canada and a resident of country A on behalf of its controlled foreign affiliate, a resident of country B. The Taxpayer initially entered into a licensing agreement for the worldwide rights to use a particular patent, but subsequently assigned the Patent Right Agreement to the controlled foreign affiliate.
Position: Question of fact.
Reasons: To the extent that the payment made by the corporation resident in Canada to the non-resident is a rent, royalty, or similar payment, the full amount of the payment would be subject to Part XIII withholding tax pursuant to paragraph 212(1)(d). Additionally, whether or not the payment was a rent, royalty or similar payment, subparagraph 212(1)(d)(i) would apply to the extent that the payment was for the use of or for the right to use in Canada the particular patent. The determination of whether or not paragraph 212(1)(d) applies to a particular payment by a Canadian resident to a non-resident person is a question of fact based on the legal nature of the transactions and the legal relationships between the parties involved in the series of transactions. A review of all the facts surrounding a particular situation would be required to conclude if the particular payment would be subject to Canadian withholding tax