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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Dear Sirs:
This is in reply to your letter of March 28 concerning franchise fees paid to a U.S. resident. We apologize for the delay in replying.
Since you did not submit a copy of the relevant license agreement, we can reply in general terms only. Generally speaking, a lump sum franchise licence fee represents in our view a payment for the use of omen or more of the properties referred to in subparagraph 212(1)(d)(i) of the Income Tax Act, and is thus subject to Part XIII tax. Such a payment is also, generally speaking, considered to be for the use of one or more that the properties referred to in part 4 of Article XII of the Canada-U.S. Income Tax Convention (1980). Hence, the Canadian payor is obligated, pursuant to subsection 215(1) of the Income Tax Act, to withhold the applicable 10% rate of tax and remit same to the Receiver General by the 15th day of the month following the month in which the tax was withheld.
If the non-resident feels that the Part XIII tax was incorrectly withheld, he may file a form NR7-R (request for a refund) within two years from the end of the calendar year in which the relevant payment was made to him. Upon receipt of this request for a refund of Part XIII tax withheld, officials of the appropriate District Taxation Office will review the matter to determine the legitimacy of the non-resident's request.
Should you require additional information with regard to any of the above comments, or wish a further review of the matter at this time, please submit all relevant information and documentation to the Toronto District Taxation Office at the following address:
- Toronto District Taxation Office Revenue Canada, Taxation Chief of Verifications and Collections 36 Adelaide Street E. Toronto, Ontario M3C 1J7
We trust the above comments will be of assistance.
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