26 October 1992 Income Tax Severed Letter 9230895 - Interest Paid to Non-residents

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.

923089
19(1) T.B. Kuss
(613) 957-2117

October 26, 1992

Dear 19(1)

Re: Withholding Tax on Interest Paid to Non-Residents

This is in reply to your letter dated October 7, 1992 in which you requested our comments regarding withholding tax on interest paid by a person resident in Canada to a non- resident.

Generally, a non-resident person shall pay an income tax of 25% on every amount that a person resident in Canada pays or credits to him as, on account of or in lieu of payment of, or in satisfaction of interest. The person resident in Canada that is paying the interest is generally responsible for withholding the applicable tax from the interest payment and remitting it to Revenue Canada, Taxation. The tax rate of 25% may be reduced by the applicable Tax Treaty, if any.

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Where the beneficial owner of the interest is a resident of Belgium under the Canada-Belgium Income Tax Convention, or a resident of the Netherlands under the Canada-Netherlands Income Tax Convention, the tax so charged shall not exceed 15% of the gross amount of the interest. Whether the debt is secured by a mortgage will not affect the rate of withholding tax applicable.

The domestic taxation laws of the country in which the recipient of the interest is resident would govern how the interest income would be taxed in that country. Normally, in the state where the recipient of the interest is resident the gross amount of the interest (including the amount withheld and remitted as tax to Revenue Canada, Taxation) would be reported as interest income. The state of residence would give some form of tax credit in respect of the taxes paid to Canada. You should consult your local tax advisor or the local tax authorities in this regard.

We hope our comments are of assistance.

Yours truly,

for Director
Reorganizations and Foreign Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch

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