5 June 1978 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.

June 5, 1978

Source Deductions Division

Mr. F.W. Shoobert Director

Technical Interpretations Division R. G. McCorkle

Canada-Israel and Canada-France Tax Conventions

In our memorandum of January 25, XXXX our use of the wording "is ... being taxed" was intended to have the same meaning as the wording "is taxable" that is used in paragraph 2 of Article XI of both the France and Israel tax conventions.

Our comments relating to the questions you have raised are as follows:

1. Paragraph 2 of Article XI in each of these conventions provides that Canada can tax this interest in accordance with the provisions of our law but if the recipient is a resident of the treaty country (France or Israel as the case may be) and provided such interest is taxable in the home state, the non-resident person is eligible to have his Part XIII tax determined at a rate not exceeding 15%.

2. Subsection 215(1) provides that the payer withholds the amount of the tax and remits it on behalf of the non-resident person on account of the recipient's Part XIII tax. The payer should withhold tax at 25% (paragraph 212(1)(b)) unless he has information that clearly indicates that the non-resident recipient (who is also beneficial owner) acts the requirements of paragraph, 2 of Article XI of the pertinent convention.. In the latter case the payer should withhold 15%.

3. Where tax is withheld at 25% the recipient can apply for a refund (subsection 227(6)). If the Minister is not satisfied that the tax- payer is entitled to be taxed at the lower rate an assessment notice can be sent to that person at the higher rate (subsection 227(7)). The taxpayer may appeal such assessment. Subsections 215(6) and 227(8) could be applied if the payor does not withhold sufficient Part XIII tax from an amount paid to a non-resident recipient.

R.D. WEIL

for Director Technical Interpretations Division