15 May 1980 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.

May 15, 1980

HEAD OFFICE Non-Corporate Rulings Division C.R. Brown

Service Contracts with Non-Residents

In your round-trip memorandum, you requested our views on the following arrangements involving non-residents.

1. XXXX

Although we did not see the actual agreement, we assume that none of the properties mentioned in subparagraph 212(1)(d)(i) of the Act were involved in the agreement and furthermore, that no part of the payment was based on the production or profit from goods or property.

We assume then, that the payments made under this agreement were totally for the services performed by XXXX and would not constitute a "rent, royalty, or similar payment." Consequently, as you point out in your memo, Article 6(6) of the Canada-U.K. Tax Agreement included such services in the industrial and commercial profits of the U.K. company and as no permanent establishment exists, this payment will not be subject to withholding tax by virtue of Article 6 and Article 14 will exempt XXXX employees.

2. XXXX

Once again, it appears the payments were totally for services rendered and cannot be considered rents, royalties or similar payments. We also believe it unlikely that any of the employees of this enterprise received over XXXX for his services rendered in Canada. Consequently, we believe the payments to XXXX will be exempt from Canadian tax pursuant to Article I of the Canada-U.S. Tax Convention and the employees will be be exempt under Article VII.

for Director Non-Corporate Rulings Division

Article 6 Canada-U.K. Treaty Article I Canada-U.S. Tax Treaty