6 February 1990 Internal T.I. 90M02429 F - Security Lending - Exemption under Tax Agreement with U.K

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.

24(1) - SECURITY LENDING REVENUE CANADA - UNITED KINGDOM INCOME TAX CONVENTION

We are writing in regard to an interpretation of Article XI, sub-paragraph 4(a) and paragraph 5 of the above-noted treaty.  24(1) has requested confirmation as to the tax treatment of income received by the 24(1) as compensation for Canadian Government Bonds loaned pursuant to a securities lending arrangement. 24(1) is of the opinion that the treaty exempts this income from Part XIII tax (copy of letter attached).

The investments involved in the securities lending arrangement are Government of Canada debt obligations and thus possibly fall within the parameters of subparagraph 4(a). The income to be considered consists of both the interest paid on the bonds that still goes to 24(1) pursuant to the lending agreement and the lending fee itself.  Since the definition of interest in Article XI is "all-inclusive", domestic law (i.e. Bill C-28 and securities lending legislation) may not come into play.

The letter from the 24(1) also requests the department's position on the same issue with respect to sovereign immunity. We would prefer to solve the matter through the treaty provision. If this is not possible, we will then consider exemption pursuant to the Doctrine of Sovereign Immunity. 19(1) is aware of our objective and would be satisfied with an acknowledgement of treaty exemption only.

Any comments you may have on the above would be appreciated. 19(1) would like to be contacted by the Rulings officer assigned the file so as to provide more details. If we can be of assistance, please do not hesitate to contact us.

C. SavageA/DirectorProvincial and International Relations Division

Attachment

no-HiltzJW/sgFile copySequence fileAuthor's copyChrono file (2)Reading file