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 dated June 8, 1989. You have asked us to review the standard Statsoft computer software single user license agreement and to comment whether in our view license fees paid to Statsoft by Canadian users are subject to Canadian withholding tax.
In our view, the one time fee paid by a XXX. The transaction cannot be considered an outright purchase due to the various restrictions on the use of the software listed in the license agreement. Accordingly, as set out in our letter dated October 2, 1986 to the XXX (the "1986 letter") which you mention in your letter, Canada has the right to tax such royalty income earned by a resident of the United States at the reduced rate of 10% under Article XII of the Canada U.S. Income Tax Convention (1980). It is our understanding that in most cases this Canadian tax is creditable against U.S. income taxes.
As indicated in the 1986 letter, telephone hotline services, where the person providing the information or advice on such hotlines is outside Canada, will not be considered to be rendered in Canada. Thus any fee for such services will not be subject to Canadian income tax. However, in order that it will not be considered part of the computer software license fee which is subject to Canadian withholding tax, the payment for these services must be optional and reasonable in relation to the software license fee. Having read your letter and the XXX agreement. we can find no reason to believe that the hotline services are optional services that are rendered for a separate fee. Accordingly, it is our view that the XXX license fee is fully subject to Canadian withholding tax.
We trust that this is the information you require.
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© Her Majesty the Queen in Right of Canada, 1989
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, 1989
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