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.
January 17, 1984
E.E. Campbell
Dear Sirs:
Further to our letter of April 20, 1983, we are now in a position to respond to the request for exemption from withholding tax under Part XIII of the Income Tax Act.
The Income Tax Act does not provide an exemption from taxation for payments made to foreign governments. However, we have granted exemptions under the Doctrine of Sovereign Immunity, which doctrine recognizes the sovereign existence and the rights of a nation. Our position has been set out in Information Circular 77-16R, in particular paragraph 48, which attempts to define the conditions under which the doctrine applies.
In the past our position has been that the doctrine would apply to the national government but not to political subdivisions. The State Immunity Act was passed into law in 1982 and attempts to define the rights and responsibility of foreign governments before our courts. While it does not specifically de with taxation matters, there are important principles involved including the relationship with political subdivisions and related agencies.
After discussions involving other departments, including Finance and External Affairs, we have established our position on this matter. It is our view that an exemption cannot be granted to political subdivisions such as county councils or related bodies. Even applying the principles in the State Immunity Act, we cannot extend the Doctrine of Sovereign Immunity to that extent.
We regret the delay in this matter and that our reply could not have been more favourable.
Yours sincerely,
P. Pinkus Director Provincial and International Relations Division
EEC/jb
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