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:
Re: Netherlands Mortgagee and Withholding Tax
This is in reply to your letter dated May 24, 1983 wherein you request an opinion on the following situation:
The Situation
- 1. Mr. A owns a residential property on which there is a a mortgage.
- 2. According to the mortgagee documents, the current owner of the mortgage loan is shown as an individual with a particular Netherlands address, care of a particular Canadian address.
- 3. The particular Canadian address is that of a financial institution which is acting as agent for the owner of the mortgage loan receiving the mortgage payments for the mortgagor.
You would like to know whether any withholding tax is applicable in such circumstances and, if so, at what rate.
In the situation which you describe, the mortgage interest would appear to be subject to Part XIII tax at a rate of 25% pursuant to paragraph 212(1)(b) of the Act. We note that there is nothing in the Canada-Netherlands Tax Convention which overrides the Act in this regard. However, if the mortgage was issued before 1976, the rate of withholding would be reduced to 15%, pursuant to subsection 10(4) of the Income Tax Application rules, 1971.
Where an amount which is subject to Part XIII tax is paid or credited to an agent on behalf of the non-resident, the payor is obligated by virtue of subsection 215(1) of the Act to withhold and forthwith remit the appropriate amount of Part XIII tax. Failure to so withhold and remit subjects the payor to the possibility of an assessment under subsections 215(6) and 227(8) of the Act notwithstanding that he may not have known that the recipient was only an agent.
We trust the foregoing comments will be useful to you.
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© Her Majesty the Queen in Right of Canada, 1983
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© Sa Majesté la Reine du Chef du Canada, 1983
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