20 January 1997 External T.I. 9629235 - TAX SPARING - KINGDOM OF MOROCCO

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:

Are bonds issued by the Kingdom of Morocco eligible for tax sparing under Article XXII of the Canada-Morocco Convention?

Position:

No.

Reasons:

Per competent authority list in Protocol has not been amended to include Kingdom of Morocco nor would it be appropriate to include it when such government bonds are exempt from tax under Article XI in any event.

							962923
XXXXXXXXXX				J. Stalker

Attention: XXXXXXXXXX

January 20, 1997

Dear Sirs:

Re: General Revenue Bonds Issued by the Kingdom of Morocco

We are writing in response to your facsimile transmission dated September 2, 1996 in respect of the Canada-Morocco Income Tax Convention (the "Convention").

You have asked whether the tax sparing provisions in Article XXII of the Convention would apply to interest payments on bonds issued by the Kingdom of Morocco. Pursuant to paragraphs 1 and 4 of Article XXII of the Convention, Canada agrees to allow a credit against Canadian tax for Moroccan tax payable, including "any amount which would have been payable as Moroccan tax for any year ...", "in respect of interest on loans issued by specialized bodies contributing to the economic development of Morocco." Paragraph 2 of the 1975 Protocol to the Convention lists the "specialized bodies" which are referred to in subparagraph 4(c) of Article XXII. However, the Kingdom of Morocco is not included in that list of "specialized bodies".

It is our understanding from discussions with a representative of the Canadian Competent Authority that the list of specialized bodies in the Protocol has not been amended to include the Kingdom of Morocco and that furthermore such an amendment would not appear to be appropriate, in that interest on bonds issued by the Kingdom of Morocco would be exempt from tax in Morocco, pursuant to paragraph 7 of Article XI of the Convention. (In this respect, it is also our understanding that interest paid by the entities on the list of "specialized bodies" in the Protocol would not be eligible for the exemption in paragraph 7 of Article XI of the Convention.) Accordingly, it is our view that the tax sparing provisions in Article XXII of the Convention do not apply to interest on bonds issued by the Kingdom of Morocco.

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 22 of Information Circular 70-6R3, are not binding on the Department.

Yours truly

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