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.
RE: Legal Opinion: Part XIII and XXX
Background
This is further to our memo of January 30, 1986 concerning the above taxpayer.
At its February 4, 1986 meeting, the Committee queried the last sentence in that memo which read as follows:
"Under the 1980 Canada-U.S. tax treaty, the withholding tax on payments for a live signal or portions that are scripted or involve replays is limited to 10%."
Issue
The Committee was concerned with the portion of the statement that involved a live signal, something which is currently not subject to copyright protection in Canada.
Comment
Article XIIIC in the 1942 Canada-U.S. Treaty provides that "royalties for the right to use copyright ... derived from sources within one of the contracting states ... shall be exempt from tax imposed by such former State". Thus, the portion of the live signal not involving instant replays or scripted events therein is not exempt while the 1943 Treaty is applicable.
Article XII of the 1980 Canada-U.S. Treaty applies to royalties. However, Article XII(4) defines "royalties" to mean payments of any kind received as consideration for the use of, or the right to use, any copyright of ...". Consequently, the payment for a live signal which is not copyrightable in Canada is not subject to the provisions of Article XII.
Article XII of the 1980 Treaty and the first full paragraph on page 16 of the October 8, 1985 legal opinion were discussed with Sandy Farber on February 5. XXX
Recommendation
While the 1942 Treaty is still in effect only the the scripted or replay portion of the live signal will be exempt from tax per Article XIIIC. The balance of the payment for the live signal will be subject to 15% withholding tax pursuant to Article XI.
As long as live signals, excluding any portion based on replays or scripts, are not subject to copyright protection in Canada, the payment therefore is not subject to the provisions of Article XII of the 1980 Canada-U.S. Treaty.
Comment
Finance has been informed of our position and does not take exception to it.
The Copyright Act is now the subject of a review with a major overhaul likely to be recommended by a Parliamentary Committee within the next 12 to 24 months. It is too early at this stage to know whether something such as a live signal (or software) is slated for protection in the future.
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, 1988
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, 1988
Email this Content