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.
This is in reply to your Round Trip Memorandum dated December 24, 1980 requesting our opinion as to the application of paragraph 212(13)(f) to the following situation.
Non-resident A purchased an apartment building situated in Canada and as part of the transaction, gave back a second mortgage to the vender who was a Canadian. When the second mortgage matured in 1980, another non-resident B lent funds to A to enable him to pay off the second mortgage.
The loan from B to A is a personal loan. It is not secured in any manner by real property situated in Canada or an interest therein. There are no collateral agreements between B and A under which it could be said that B secured his loan on the property in Canada or acquired any sort of interest in the property in Canada by way of security. Under the terms of the loan between B and A, in the event of non-payment, B's only recourse is against A personally.
Based on the above facts, it is our view that the indebtedness would not be caught within the meaning of paragraph 212(13)(f) because it is not secured by real property situated in Canada or an interest therein. We have been unable to find any support for your contention that by issuing a loan to pay off the second mortgage B would be considered as having an implied interest in that particular piece of real estate and would suggest therefore that the assessment of the withholding tax be discontinued unless you have further support for your position.
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, 1981
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, 1981
Email this Content