30 November 1995 Ruling 9620593 - TAXABILITY OF SETTLEMENT PAYMENT

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:

Nature of a XXXXXXXXXX payment to U.S. residents XXXXXXXXXX

Position:

Payment would be a XXXXXXXXXX taxable under the Act but exempt by virtue of the Canada-U.S. Income Tax Convention

Reasons: (See detailed analysis below)

XXXXXXXXXX
XXXXXXXXXX						962059
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1996

Dear Sirs:

Re: XXXXXXXXXX
Advance Income Tax Ruling

This is in reply to your letter of XXXXXXXXXX wherein you requested an advance ruling on behalf of XXXXXXXXXX.

All terms used herein that are defined in the Income Tax Act, R.S.C. 1985, 5th Supplement, as amended (the "ITA") have the meaning given such definition unless otherwise indicated, and all statutory references herein are to the ITA unless otherwise indicated.

Our understanding of the facts, proposed transaction and purpose of the proposed transaction is a follows:

Facts

1.XXXXXXXXXX is incorporated under the Canada Business Corporations Act. XXXXXXXXXX Its head office is located in XXXXXXXXXX.

XXXXXXXXXX

2. XXXXXXXXXX

3. XXXXXXXXXX

4. XXXXXXXXXX

XXXXXXXXXX

5. XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX

6. XXXXXXXXXX

7. XXXXXXXXXX

XXXXXXXXXX

8.To the best of your knowledge and that of XXXXXXXXXX management, none of the issues or matters concerning the ruling requested is being considered by a Taxation Services Office or a Taxation Centre with respect to a return already filed nor are any of the issues the subject of a Notice of Objection or Appeal by XXXXXXXXXX.

Proposed Transaction and Purpose of the Proposed Transaction

9. XXXXXXXXXX

10. XXXXXXXXXX

Until the principal is paid in full, it will bear interest.

Ruling Given

Provided the above statements of facts and proposed transaction are accurate and constitute complete disclosure of all the relevant facts and the proposed transaction and that the proposed transaction is carried out as set out herein, our ruling is as follows:

The proposed aggregate payment referred to in paragraph 10 above (excluding any interest thereon) XXXXXXXXXX, while constituting a royalty or a similar payment pursuant to paragraph 212(1)(d) of the ITA, will not be subject to taxes imposed under Part XIII of the ITA by virtue of subparagraph 3(c) of Article XII of the Canada-U.S. Income Tax Convention.

This ruling is given subject to the limitations and qualifications set out in the Department's Information Circular 70-6R2 dated September 28, 1990, and Special Release relating thereto dated September 30, 1992. The ruling is binding provided that the completion of the settlement agreement is carried out by XXXXXXXXXX.

The above ruling is based on the law as it presently reads and does not take into account any proposed amendments to the Act which, if enacted into law, could have an effect on the ruling herein.

Comments

We wish to emphasize that the above ruling is based on an interpretation of the provisions of the ITA and the Canada-U.S. Income Tax Convention and should not be construed as having any impact on XXXXXXXXXX obligation to withhold under the ITA. Any authorization not to withhold must be sought from the responsible Taxation Services Office.

Yours truly,

for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch