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.
February 20th, 1986
Mr. Keith B. Harding Provincial & International Relations Division Head Office, Revenue Canada Taxation Ottawa, Ontario K1A 0L8
Dear Mr. Harding,
RE: CANADA AND BRAZIL INCOME TAX CONVENTION
Further to our conversation of February 18th, regarding the above- captioned matter, could you please elaborate on the restriction contained in paragraph 2 of Article 22, quoted as follows:
"The deduction shall not, however, exceed that part of the income tax as computed before the deduction is given, which is appropriate to the income which may be taxed in Brazil."
In the case of interest on loans to Brazilian residents, my interpretation is that the foreign tax credit deduction is restricted to the amount of Canadian income tax on the gross interest receipts subject to Brazilian tax (i.e. not net of the respective cost of funds). That a large number of such loans are booked through our XXXX branch does not in our opinion prevent us from entitlement to claim the above-mentioned deduction.
Your comments would be most appreciated.
Yours sincerely, XXXX
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