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.
Whether U.S. Branch Profits Tax is a Creditable Tax
It is the equivalent of our Part XIV Branch Tax and the Canada-U.S. Income Tax Convention recognizes both countries' right to impose such a tax but within the limits provided for in the Convention.
We previously expressed an opinion that the tax was creditable in a letter to XXXXXXXXXX dated July 9, 1987 #5-3449.
June 24, 1996
D. W. Mitchell David R. Senécal
Banking Specialist (613) 957-9796
Industry Specialist Services
Toronto North TSO
Creditability of U.S. Branch Profits Tax
This is in reply to your memorandum of April 10, 1996, wherein you requested our opinion as to whether the U.S. Branch Profits Tax (the "Tax") levied by virtue of section 884(a) of the U.S. Internal Revenue Code would be creditable against Canadian income tax pursuant to subsection 126(2) of the Income Tax Act (the "Act").
In our opinion, the basis of taxation for the Tax is substantially similar to the branch tax imposed by Canada pursuant to Part XIV (Additional Tax on Non-resident Corporations) of the Act and is an "income or profits tax" for the purposes of section 126 of the Act. Consequently, to the extent that the Tax is calculated in accordance with the provisions of paragraph 6 of Article X of the Canada-U.S. Income Tax Convention and may reasonably be regarded as a tax in respect of the Canadian taxpayer's income from any business carried on by it in the U.S., the Tax paid will be included in the calculation of the taxpayer's "business-income tax" as defined in subsection 126(7) of the Act.
We trust that our comments will be of assistance to you.
Reorganizations and International Division
Income Tax Rulings and
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