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: Non-Resident Tax in connection with Video Tapes - Technical Explanation of United States - Canada Income Tax Convention, 1980
The purpose of this memorandum is to obtain your comments with respect to the interpretation of subsection 212(5) of the I.T.A., of paragraph 3 of Article XII of the Canada-U.S. Income Tax Convention (1980), of the third paragraph of the notes under the heading "Article XII Royalties" in the Technical Explanation published by the U.S. Treasury Department and the applicability of the administrative position taken with respect to videotapes for private (home) use in the said notes in interpreting other tax conventions.
Subsection 212(5) provides for payment of an income tax of 25% on every amount paid for a right in or to the use of:
(i) a video tape for use in connection with television (212(5)(b)).
(ii) a video tape (other than for use in connection with television) that is derived from a motion picture film (212(5)(a)).
Video tapes not derived from motion picture films and not for use in connection with television are exempted from the said tax.
Paragraph 3 of Article XII of the Canada-U.S. Income Tax Convention (1980) exempts literary, dramatic, musical or artistic work (but not including motion pictures and works on film, videotape or other means of reproduction for use in connection with television) from such tax.
In the Technical Explanation published by the U.S. Treasury Department, it is stated:
"Paragraph 3 (Article XII) provides that, notwithstanding paragraph 2, copyright royalties and other like payments in respect of the production or reproduction of any literary, dramatic, musical, or artistic work, including royalties from such works on videotape or other means of reproduction for private (home) use, if beneficially owned by a resident of the Contracting State, may not be taxed by the Contracting State of source.
Based on a release issued by the Department of Finance on August 16, 1984, Revenue Canada has taken the view that this interpretation satisfies the intent of both the U.S. and the Canadian government and that such an exemption would apply in respect of the Canada-France Income Tax Convention (1975) and presumably in respect of other countries having similarly worded conventions.
Rulings and opinion letters to taxpayers' representatives and to District Offices have been issued with some variances in the interpretation of "for private (home) use". As per a "Memo for File", it appears that after discussions with Messrs. Campbell and Harding of your Division and Mr. D. Delorey the a with Non-Corporate Rulings Division, it has been decided that private use will be interpreted as meaning anything other than commercial use; i.e., if there is a charge for viewing the videotape, the use is not private.
With respect to videotapes used on flights, it was considered there was a charge for viewing the movie (directly or indirectly). On the other hand, a favourable ruling had previously been given on the understanding that the amounts paid did not relate to use of the video tapes in connection with television broadcasting, without further reservations. On one specific instance, we went as far as defining the private use" to mean "the right to reproduce, transmit, display, exhibit, project, sell, license, rent and distribute (and to sublicense others so to do) the Picture(s) to and by educational institutions and organizations of All kinds (including without limitation, public and private schools, colleges and universities), medical institutions of all kinds (including without limitation, hospitals, nursing homes, chiropractors and doctors offices), museums, libraries, churches, government agencies, military bases and institutions, retail businesses and industrial corporations, private homes and all other persons, firms corporations or other organizations whatsoever except television broadcasting and pay-cable television sales."
We are presently considering a ruling request in connection with the Canada-France Income Tax Convention, 1976, where the private sector is defined to mean the family circle, the public acquiring video tapes and by extension hotels, hospitals, nursing homes, drilling rigs, all governmental and other public institutions including schools.
Private use is not a defined tern and does not appear in legal dictionaries. However, we are of the opinion that the authors of the Technical Explanation had given it a meaning much more restrictive than the ones referred to above, by adding "(home)" between the two words.
In our discussions with officers of the former Non-Corporate Division, it has been mentioned that you were initially of the opinion that videotapes of motion picture films used on aircraft (domestic flights) are also exempted.
In order to enable us to properly interpret the income tax conventions, could you provide us with some evidence on the understandings reached by the representatives of Canada and the United States on this issue in the course of negotiating the Canada-United States Income Tax Convention (1980) also with your comments with respect to the meaning to be given to "private (home) use" as used in the Technical Explanation on Article XII and the applicability of these notes to other Income Tax convention, namely the Canada-France one.
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, 1985
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, 1985
Email this Content