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.
XXXX K.B. Harding (613) 957-2129
NOV 16 1988
Dear Sirs:
This is in reply to your letter of August 9, 1988 concerning the question of whether interest paid to a non-resident bank is subject to withholding tax in Canada in the following situation.
A non-resident corporation, all of whose shareholders are non-resident, purchase a commercial rental property in Canada.. The purchase price is partly financed by a loan from a non-resident bank. The bank loan-is not secured by-the Canadian rental property but by other assets of the non-resident corporation. The non-resident corporation will report the rental income pursuant to section 216 of the Income Tax Act (Act).
It is our view, based on the above facts, that the indebtedness would not fall within paragraph 212(13)(f) of the Act because it is not secured by real property situated in Canada or an interest therein. Since the non-resident corporation would not be deemed to be a person resident in Canada in respect of the payment of interest, such payments would not be subject to withholding tax under paragraph 212(1)(b) of the Act.
We trust this is adequate for your purposes.
for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1988
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© Sa Majesté la Reine du Chef du Canada, 1988
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