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.
923830 XXXXXXXXXX
K. B. Harding
Attention:
January 15, 1993
Dear Sirs:
- Re: Withholding Tax under the Canada-Barbados Income Tax Agreement
- This is in reply to your letter of December 14, 1992 wherein you requested our opinion concerning the rate of withholding tax on interest paid to a Barbados International Business company.
- Paragraph 212(1)(b) of the Income Tax Act (the "Act") provides that every non-resident person shall pay an income tax of 25% on every amount that a person resident in Canada pays or credits, or is deemed by Part I of the Act to pay or credit, to him, as on account or in lieu of payment of , or in satisfaction of, interest.
- Article XI of the Canada-Barbados Income Tax Agreement (the "Agreement") provides that the rate of withholding on such interest is reduced to 15% of the gross amount of the interest provided the resident of Barbados is subject to tax in Barbados on the interest. However, as indicated in your letter paragraph 3 of Article XXX of the Agreement denies the relief provided under the Agreement to companies entitled to any special tax benefit under the Barbados "International Business Companies (Exemption from Income Tax) Act, Cap.77" or to companies entitled to any special tax benefit under any similar law enacted by Barbados in addition to or in place of the law.
- Since Article XXX of the Agreement denies the relief provided under the Agreement to the Barbados International Business companies, any interest paid to such companies will be subject to 25% withholding tax in Canada pursuant to paragraph 212(1)(b) of the Act.
We trust the above comments are adequate for your purposes.
Yours truly,
- for Director Reorganizations and Foreign Division Rulings Directorate Legislative and Intergovernmental Affairs Branch
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