26 January 1990 Ruling 32901 F - Non-Resident Withholding Tax on Interest Payment

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.

January 26, 1990

Dear Sirs:

Re:  Request for an Advance Income Tax Ruling 24(1)

We are replying to your letter dated December 3, 1989 requesting advance rulings with respect to 24(1)

We are unable to provide the requested advance income tax ruling. In our view, it is a question of fact if the tax was required by paragraph 212(1)(b) to have been withheld in prior years when interest was recorded in respect of security provided by the non-resident.  The review of the tax consequences of completed transactions, such as the crediting of interest in this case, is the responsibility of the district taxation offices of Revenue Canada, Taxation.

We note that the exemption from a paragraph 212(1)(b) withholding requirement contained in subclause 212(1)(b)(ii)(C)(I) would only be available in respect of "...bonds, notes, mortgages, hypothecs or similar obligations of or guaranteed by the Government of Canada..."  Thus the exemption would apply only in cases where it could be established, inter alia, that interest was paid or credited in respect of a debt instrument which had characteristics the same as or similar to bonds, notes, mortgages or hypothecs.  The relevant characteristics to be considered in order to determine whether a particular debt was described in subclause 212(1)(b)(ii)(C)(I) would therefore include its provisions with respect to interest, repayment and consequences of default.

We are forwarding a copy of the ruling request and a copy of this memorandum to the St. John's District Office.  You may wish to discuss the issues raised in the ruling request with the appropriate District Office officials.  If so we suggest that you contact Mr. Jim Hillier at phone number 772-5009.

Your cheque for $250 will be returned to you separately.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate