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.
December 30, 1986
HBW 6591-B3 J.R. Castendyk 957-2063
Dear Sir:
We are writing to you in connection with Articles 25, 22 and 11 of the Canada-Brazil Income Tax Convention.
When a person in Brazil pays interest on money owed to a person resident in Canada, Brazil may tax that interest as provided by paragraph 2 of Article 11. We understand that in practice the debtor (i.e. the person who owes the money and pays the interest) withholds the tax from the interest payment and remits it to your Department. It has come to our attention that, in some instances, the Brazilian government subsequently refunds a portion of the tax to the debtor.
We would appreciate it if you would advise us whether our understanding of this process is correct.
We raise this question because if our understanding is correct, such refunds would affect the relief the Canadian recipients of the interest could claim against their Canadian tax in respect of the Brazilian tax. Under our law only the net amount of the Brazilian tax, after deducting the amount refunded to the debtor, would be eligible for relief. We enclose an excerpt from the relevant provision, subparagraph 126(7)(c)(v) of the Income Tax Act.
If Brazilian tax is indeed being refunded, we would want to solicit your help in providing us with information about the refunds that would enable us to verify the application of paragraph 126(7)(c)(v) by Canadian taxpayers who receive interest from Brazil.
We are grateful for your cooperation in this matter.
Yours sincerely,
Director Provincial and International Relations Division
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© Her Majesty the Queen in Right of Canada, 1986
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© Sa Majesté la Reine du Chef du Canada, 1986
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