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.
RE: Delay Rentals Paid to Non-Residents
As a result of the recent ratification of the Canada-United States Income Tax Convention, 1980, ("the 1980 Convention"), we are reviewing our present treatment of delay rentals paid to non-residents. In this regard, we are writing to request information on the volume of this type of transaction dealt with by the District Offices in the normal course of a year as well as the size of the payments involved.
Our present policy is to tax Canadian recipients of delay rentals as being in receipt of proceeds of disposition of resource properties (Sparrow case, 1957 DTC 453, T.A.B.) whereas non-resident recipients are taxed under Part XIII (212(1)(d)) as being in receipt of a rent or similar payment.
Because Article VI of the 1980 Convention now permits us to tax U. S. Recipients of such amounts under Part 1 or Part XIII (compare Article VIII of 1942 Convention - Part XIII route only available), we are in a position, if we desire and it is practical to do so, to introduce consistent Part I taxation of these amounts after 1985 for both residents and non-residents.
However, that approach could prove unwieldy as District Offices could be faced with a flood of section 116 exemption certificates in respect of delay rental payments to non-residents as compared to the relative administrative simplicity of the existing Part XIII approach which might be more practical to retain, "Sparrow" permitting.
We are assuming the majority of delay rental transactions with non-residents are with U. S. recipients.
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© Her Majesty the Queen in Right of Canada, 1985
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© Sa Majesté la Reine du Chef du Canada, 1985
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