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 Sirs:
This is in reply to your letter of September 11, 1987 in which you requested our opinion on interpreting Articles 4 and 10 of the Canada-Netherlands Income Tax Convention (1986) (the "Treaty") as they apply to a Dutch pension fund which is exempt from income tax in the Netherlands under the Dutch income tax act.
Article 56 of the Corporate Income Tax Act, 1969 (the "Act") provides that a pension fund legally established in the Netherlands as a "Stichting", whose principal purpose is the administration and provision of pension and retirement benefits to employees under a pension or retirement plan, is exempt from the payment of income tax imposed under laws of The Netherlands. However, if a "Stichting" carries on a business or trade, the exemption does not apply and the Stichting becomes fully liable to tax.
With respect to your first question, it is our opinion that the Stichting referred to in Article 5b of the Act will be considered to be resident in the Netherlands for purposes of the Treaty, provided that if the Stichting was not exempt from tax under Netherlands income tax laws it would be resident in the Netherlands pursuant to Article 4 of the Treaty.
With respect to your second question, it is our opinion that if a Stichting is a body corporate then the provisions of Article 10(2)(a) of the Treaty may apply to reduce the rate of withholding to 10% on the gross amount of any dividends received by the Stichting provided the Stichting is the beneficial owner which holds directly 25% of the capital of the company paying the dividends.
We trust this information will be of assistance to you.
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© Sa Majesté la Reine du Chef du Canada, 1988
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