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.
This is in reply to your letter of May 20, 1986 concerning whether interest payments by certain Canadian institutions on debt obligations owing to residents of the United Kingdom (the "U.K.") are exempt from the withholding requirements of Part XIII of the Canadian Income Tax Act. You specifically make reference to a recent change in the U.K. law exempting U.K. building societies, and perhaps other institutions, from withholding tax on payments of interest to Canadian residents. You ask if Canada has similar arrangements.
Our Comments
We are enclosing a copy of Information Circular IC-77-16R2 [Information Circular 77-16R2] which provides a general description of Part XIII of the Income Tax Act that imposes a withholding tax on certain amounts paid or credited to persons not resident in Canada. Of interest to you will be paragraphs 17 to 19 inclusive which deal with withholding tax on interest payments to non-residents. Paragraph 18 sets, out the types of interest payments to non-residents which are exempt from the Part XIII tax. We note that the 1986 date referred to in paragraphs 17 to 19 of the Circular has been extended by law to 1985. Article 11 of the Canada-U.K. Income Tax Convention also exempts from the withholding tax rules, interest arising in Canada and paid to a resident of the U.K. if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the United Kingdom Export Credit Guarantee Department.
With respect to "building societies", Canada does not appear to have institutions of this nature and as far as equivalents are concerned we suggest that on your arrival in Canada that you contact any of the banks or other lending institutions for information of this nature.
Many of these lending institutions issue 5 year investment certificates which, providing they meet certain other conditions, are exempt from the withholding tax rules when issued to non-residents of Canada. For details of these other conditions, see paragraph 18(g) of the Circular and Interpretation Bulletin IT-361F, a copy of which is also attached for your information.
We trust our comments and enclosures will prove helpful.
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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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