3 December 1987 Income Tax Severed Letter

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 3, 1987

Specialty-Rulings Directorate K.B. Harding 957-2129

RE: XXXX

This will follow up our memorandum of November 18, 1987 concerning the above taxpayer.

It would appear that the wording of the penultimate paragraph of the above letter is misleading and should be revised as follows.

Paragraph 4 of Article XXIV of the Convention does not preclude Canada from applying subsection 20(11) of the Income Tax Act and therefore the non-business income tax, as defined in paragraph 126(7)(c), is automatically reduced by the amount deducted under subsection 20(11) of the Act. Under subsection 20(11) of the Act the taxpayer is permitted a deduction from income in respect to the portion of profits or income tax paid by him to the foreign government on income from property, other than real property, equal to the amount by which the income or profits tax paid to that foreign government exceed 15% of the amount included in computing his income for the year from that property. Accordingly, XXXX should be permitted a foreign tax credit under subsection 129(1) of the Act in respect to the amount determined under paragraph 126(7)(c) of the Act after making the appropriate deduction under subsection 20(11) of the Act,

Since this is in accordance with the provisions of Article XVIII and XXIV of the Convention, the U.S. will treat a portion of the pension income as arising in Canada in order to avoid double taxation as provided for in paragraph 6 of the latter Article.

We trust this change in our letter will clarify the matter for you.

for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch