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: Confirmation of previous opinion (file 981683) regarding withholding exemption on revolving loan drawdowns
Position: Drawdowns made with less than five years to termination will not qualify for exemption
Reasons: Each draw is a separate obligation
XXXXXXXXXX 982083
J. P. Dunn
Attention: XXXXXXXXXX
August 18, 1998
Dear sirs:
Re: Revolving Loans and Part XIII Tax
We are writing in reply to your letter of August 11, 1998 wherein you had requested that we redraft a previous technical interpretation dated July 26, 1998 addressed to your firm (our file 981683) or, failing that, to explain our reasons for not so doing.
As previously explained in our telephone conversation, the problem arises from your conclusion that our letter of November 26, 1996 to your firm (our file 963463) represented a change in the Department’s general position regarding revolving loans and the five year requirement of subparagraph 212(1)(b)(vii) of the Income Tax Act.
The November 26, 1996 letter was concerned with withholding tax on standby and funding fees on term and revolving loans. The position with which you are now concerned was neither considered nor revised in the course of preparing that response. The response was, however, premised on your firm’s assumption that revolving loans having a term of less than five years from the drawdown date would not satisfy the requirements of subparagraph 212(1)(b)(vii) of the Act. This was clear in the incoming letter from your firm.
Insofar as the position of the Department in this matter has not changed, there is nothing further that can be offered by way of a technical interpretation. We are, however, always prepared to consider alternative arguments in the context of a request for an advance income tax ruling, which process is intended for situations such as this.
We trust that our explanation herein brings this matter to a satisfactory conclusion.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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