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.
Dear Sirs:
This is in reply to your letter of January 27, 1988 requesting additional clarification of the application of the Canadian withholding tax to payments made to U.S. residents for the purchase of computer software.
It is our understanding that you are concerned that our previous response was inadequate because it dealt only with the application of the withholding tax to situations where payments were made to non-residents of Canada for the right to use computer software under licensing agreements. It is your view that your situation is different in that the XXX was making an outright purchase of computer software.
Computer Software Purchases
It has been our experience in reviewing contracts for the "purchase" of computer software, that such a "purchase" usually does not take place, rather, what normally transpires is that a lump sum amount is paid in return for a right to use the software program in perpetuity. Generally, the purchase contract includes various restrictions as to what can be done with the software and accordingly the complete ownership does not pass to the purchaser. Thus, any payment made in respect of the software generally represents a payment for the use of, or the right to use the program. Pursuant to the 1980 Canada-U.S. Income Tax Convention, such payments made to the U.S. resident will be subject to a 10% withholding tax. In order to make a final determination on this matter it would be necessary to review the agreement in question.
We trust that the above will be of assistance in providing you with additional clarification in this matter.
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1988
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1988
Email this Content