17 April 1990 External T.I. 90M04495 F - Non-resident Income Tax - Revision of IC 77-16R3

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.

Information Circular Project Number 1532 Non-Resident Income Tax Revision of IC 77-16R3

In reply to your memorandum dated March 2, 1990, we have reviewed the Information Circular from a Provincial and International viewpoint and have no objections to the changes highlighted in the current version 4.  Accordingly, we have signed the attached Form T180.

Before circulating for remaining approvals, we would like to bring the following minor comments to your attention:

Paragraph 15

Since treaty negotiations require policy flexibility, perhaps the statement explaining the Department of Finance's treaty policy should be reconsidered.  We are also not comfortable with a statement concerning another Department's policy.  Wording similar to that used in paragraph 32 of Information Circular 87-2 may be more appropriate.

At minimum, the reference to "Fixed Base" should be deleted as that term only applies to the "Independent Services" Article.

Paragraph 33

The opening words to the sentence "This has particular application ..." is confusing and does not flow with the previous sentences. Where the exempt status is not lost, organizations that were issued certificates of exemption under subsection 106(9) of the former Act are not required to renew their pre-1972 certificates in respect of obligations acquired before January 1, 1972, regardless of whether or not they meet the conditions described in paragraph 212(14)(c). For post-1971 acquisitions that have subsection 106(9) certificates expiring on December 31, 1974, the paragraph 212(14)(c) requirement will come into play upon application for renewal.

Paragraph 33 adequately explains ITAR 10(5)(b)(i) and (iii) but ignores ITAR 10(5)(b)(ii) and (iv).  However, the sentence described above explains the criteria needed for application of renewal as a result of ITAR 10(5)(b)(ii) and (iv).

Another outlook to this paragraph might question its necessity. There are very few 106(9) certificates remaining.

Paragraph 47

Since the date of our last review, concerns have arisen regarding our administrative procedures for sovereign immunity.  If at all possible, we would like to see the following sentence added immediately before "The request should be forwarded to".

"The written authorization will have an expiry date at which time the Canadian payer would be required to re-apply for further authorization not to withhold".

Paragraph 50(a)

The Department is receiving more and more queries regarding the tax status in Canada of international organizations.  Perhaps it would be justifiable to consider adding a paragraph on the affects of legislation such as the Privileges and Immunities (International Organization) Act and the Bretton Woods and Related Agreements Act. For example, 4 out of the 6 organizations listed under Regulation 806 (see paragraph 50(a)) are totally exempt from tax in Canada pursuant to the Bretton Woods and Related Agreements Act.  Under the Privileges and Immunities (International Organizations) Act, organizations including the African Development Banff, Asian Development Bank, Caribbean Development and Inter-American Development Bank are totally exempt from tax in Canada.

If such a proposal is considered, our division would be glad to offer its assistance.

Paragraph 50(f)

We are unclear as to the meaning of the following sentence.  "In addition, any superannuation or pension benefit ...".

Pensions may be deductible under subparagraph 110(1)(f)(i) because a treaty provision has exempted all or a portion of an amount paid to a resident of Canada.  We are unable to see the connection with Part XIII requirements on similar amounts paid to non-residents.

We are of the impression the sentence is attempting to explain how a treaty provision (i.e. reduced withholding rate) may override Part XIII (i.e. as stated in paragraph 1 of this circular).  If this is the case, perhaps reference to ITAR 10(6) should be made which would clarify that the specified rate under a treaty (i.e. 0% if source country has no right to tax) overrides Part XIII rates.

C. SavageA/Director Provincial and InternationalRelations Division

JW/jb IC/N01532File copySequence file Author's copyReading file Access to Info(2)