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.
Principal Issues:
What provision(s) ensure that "deemed interest" on a prescribed debt obligation (as defined in Regulation 7000(1)) is subject to withholding tax?
Position:
Paragraph 212(1)(b). (Also 16(1) and 214(7) and (7.1), together with 212(14), could apply for greater certainty.)
Reasons:
Overall intent and scheme of Act, XXXXXXXXXX
XXXXXXXXXX 950860
Attention: XXXXXXXXXX
November 24, 1995
Dear Sirs:
Re: Prescribed Debt Obligations Held by Non-Residents
We are writing in response to your letter dated March 27, 1995 in respect of the withholding tax implications resulting from payments on prescribed debt obligations (PDOs) as defined in subsection 7000(1) of the Income Tax Regulations.
In our opinion, any portion or all of a payment on a PDO that is paid or credited to a non-resident as, or on account of, or in lieu of payment of, or in satisfaction of interest, will be subject to withholding tax under paragraph 212(1)(b) of the Income Tax Act (Canada) (the "Act"). In addition, one or more of subsections 16(1), and 214(7) and (7.1) (together with subsection 214(14)) of the Act may apply for greater certainty, confirming that it is the intent of the legislation that such an amount would be subject to withholding tax when paid or credited to a non-resident.
The above comments represent our general views with respect to the subject matter of your letter. These comments do not constitute an advance income tax ruling and therefore, as described in paragraph 21 of Information Circular 70-6R2, are not binding on the Department.
Yours truly,
for Director
Reorganizations and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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