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.
DATE: February 18, 1981
Memorandum for File
FROM- Non-Corporate Rulings Division K. R. Warren
A problem concerning the Can.-U.K. Convention (1978) has been brought to the attention of P & I by XXXX
The Problem involves a Canadian corporation borrowing Canadian dollars from a United Kingdom lender. The loan is obtained in connection with the borrower's United Kingdom permanent establishment and the interest is borne by the permanent establishment.
Under the OECD model, it would seem that interest paid under such arrangements would be exempt from tax in Canada because of Article XXI. However, there is no such provision in the Canada-U.K. Convention and because paragraph 7 of Article XI of this Convention operates to deem the interest to arise in the U.K., the interest paid is not only subject to tax in Canada, but at a 25% rate rather than the 15% rate applicable to interest arising in Canada.
Provincial and International is planning to bring this problem to the attention of the Department of Finance.
Article XI - paragraph 7 of Canada-U.K. Convention
XXI " " "
XI - paragraph 7 of OECD model
XXIAll rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1981
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1981
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