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 22, 1985
XXXX
K.B. Harding
Dear Sirs:
This is in reply to your letter of February 26, 1985, concerning paragraph 7 of Article XXV of the Canada-United States Income Tax Convention.
Your letter outlines a hypothetical situation where in 1986 a Canadian resident taxpayer incurs an expense in connection with a business with respect to:
a) advertising space in an issue of a U.S. newspaper or periodical for an advertisement directed primarily to a market in Canada, and
b) an advertisement directed primarily to a market in Canada and broadcast by a U.S. broadcasting undertaking.
It is your view that such expenditure would be deductible in computing income of the Canadian resident taxpayer since Article XXV would override the provisions of sections 19 and 19.1 of the Canadian Income Tax Act (Act).
It is our view that paragraph 7 of Article XXV of the Convention does not override section 19 of the Act since the deduction provided in paragraph 7 is based on a payment being deductible as if it were paid to a resident of Canada. As you are aware, the deduction permitted under section 19 of the Act is not dependent on the residency of the taxpayer, but is based on the citizenship of the owners of the Canadian newspaper or periodical.
In addition, the deduction permitted under section 19.1 of the Act is not dependent upon the residency of the foreign broadcasting network but is based on the location from where the network is broadcasting.
Accordingly, we are of the view that the wording of paragraph 7 does not permit us to grant a deduction for the above expenses nor was it the intention of the negotiators to permit the Convention to override the provisions of sections 19 and 19.1 of the Act.
We trust that this is satisfactory for your purposes.
Yours sincerely,
Original Signed By
Director Provincial and International Relations Division
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