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:
Characterization of a participation payment on a mortgage for purposes of Canada's Conventions.
Position:
Generally, would be characterized as income from real or immovable property.
Reasons:
Not enough facts given. But in general would be income from real property for the following reasons:
a) Canada's reservation on including participation payments in the definition of interest in the interest article in the OECD model
(b) the exclusion of participation payments from the definition of interest in the Canadian model
(c) position taken in 1985 IFA seminar referred to in incoming letter (which was dealing with mineral deposits "and other natural resources")
(d) clear intent in treaties that income from real property be distinguished
(e) potential for abuse
XXXXXXXXXX 951039
April 26, 1996
Dear Sir:
Re: Participating Mortgages on Real Property Situated in Canada
We are writing in response to your letter dated February 27, 1995 in respect of the withholding tax rate on participation payments received on mortgages on Canadian real estate.
It is our view that in general a participation payment on a mortgage on Canadian real estate would be characterized as income from real or immovable property for the purposes of Canada's Income Tax Conventions.
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 International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1996
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1996