CRA finds that lease termination damages received by a non-resident lessor were subject to Part XIII tax

In Transocean, the Federal Court of Appeal found that damages received by a non-resident lessor of a boat for repudiation of the lease before its commencement were received by it in lieu of rent, so that the payment was subject to Part XIII tax under s. 212(1)(d). CRA has applied Transocean to find that a lump sum received by a non-resident lessor of property pursuant to a liquidated damages clause for termination of a lease of Canadian property to a Canadian lessee was subject to withholding.

Neal Armstrong. Summary of 10 March 2015 Memo 2015-0574291I7 under s. 212(1).