6 July 1989 Ruling 57793 F - Finders Fees Paid to a Non-Resident

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.

July 6, 1989

Dear Sirs:

Re:  Subparagraph 212(1)(d)(iii) of the Income Tax Act (the "Act")

This is in reply to your letter of March 20, 1989 in which you asked whether Part XIII tax should be withheld in the following situation:

24(1)

As the situation you have outlined relates to a particular taxpayer we are unable to comment specifically thereon as technical interpretations are only provided in respect of hypothetical situations.  Notwithstanding this fact we are prepared to offer some general comments on the interpretation of subparagraph 212(1)(d)(iii) if the Act.

In our opinion a finders fee paid to non-resident for services rendered in connection with a sale of property would generally be subject to the withholding of Part XIII tax pursuant to clause 212(1)(d)(iii)(C) of the Act where the finder's fee is based on profits from the sale.  Furthermore, we are of the view that the phrase "but not including a payment for services performed in connection with the sale of property or the negotiation of a contract" in subparagraph 212(1)(d)(iii) would not exempt such a finder's fee from Part XIII tax unless the non-resident is directly involved in the sales activity (e.g. where the non-resident is sells property of the Canadian payer and receives a commission therefore).  If the finder's fee is paid to a resident of a country with which Canada has an income tax treaty may reduce or eliminate the amount of Part XIII tax payable.

Since the determination of your client's liability for Part XIII tax is based on the facts of the case, we would suggest you contact the appropriate District Taxation Office which is in a position to review to the particular taxpayer.

We trust this will be of assistance to you.

for Director Reorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch