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 response to your Round Trip Memorandum of June 12th concerning non-resident withholding tax on guarantee fees paid to a resident of Japan.
The Associates Corporation of North America [[1980] C.T.C. 80] (80 DTC 6049) case has been accepted by the Department as a precedent for the purposes of the Canada-United States Tax Convention only i.e. guarantee fees are not interest for purposes of the Canada-United States Tax Convention.
Our position put forth in our December 3, 1980 memorandum to Lee Baldorf remaining unchanged and the Melford Developments Inc. case [[1981] C.T.C. 30] has been appealed to the Supreme Court of Canada. Accordingly, we hold to our former view and would not agree to any change in position until the final disposition of the Melford case.
Until the courts may find otherwise, we are of the opinion that no action should be taken to refund any withholding tax to XXX Ltd. on behalf of the guarantee fees.
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© Sa Majesté la Reine du Chef du Canada, 1981
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