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.
Dear XXX
This is in reply to your letter of February 13, 1986 in which you request our opinion on whether Article II of the Canada-Norway Income Tax Convention (the "treaty") exempts residents of Norway from Canadian tax in respect of rental income from moveable property.
You are particularly concerned in this question insofar as it relates to the Bareboat Charter of offshore supply vessels by residents of Norway to residents of Canada.
You referred us to footnote (o) to Information Circular 76-12R3 which, in respect of the Treaty states that:
- "Rental payments in respect of moveable property are subject to a Nil rate of withholding."
It is our view that rental payments are not royalties and therefore are not covered by Article II of the Treaty.
The Treaty does not specifically deal with rental payments. Therefore, should such payments be considered as income from property (rather than from a business, they would be subject to Part XIII of the Income Tax Act (the "Act") and to withholding tax at a rate of 25% by virtue of paragraph 212(1)(d) of the Act.
However, provided that the rental payments represent business profits not attributable to a Canadian permanent establishment the residents of Norway will be exempt from Canadian tax on the rental payments by virtue of Article 6 of the Treaty.
We have recommended that Information Circular 76-12R3 be amended to clarify our position on withholding tax on rental payments in respect of moveable property paid by a resident of Canada to a resident of Norway.
We trust that this information will be of assistance to you.
1975 Canada-France ITC
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© Her Majesty the Queen in Right of Canada, 1986
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© Sa Majesté la Reine du Chef du Canada, 1986
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