13 December 1979 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 13, 1979

Mr. R. D. Weil Revenue Canada, Taxation Non-Corporate Rulings 875 Heron Road Ottawa, Ontario K1A 0L8

Dear Mr. Weil:

I am writing with reference to our telephone conversation of December 12th during which we discussed the rate of withholding tax applicable to rentals of an aircraft by a resident of Canada from a resident of Belgium. Specifically, Information Circular 76-12R sets out a 10% rate of withholding tax to be imposed upon rentals, other than in respect of real property and resource property, although it appears that this may be more generous than the treaty itself provides.

A review of the Canada-Belgium Tax Convention of 1975 seems to indicate that only royalties as set out under Article XII would be subject to the reduced 10% rate of withholding. The definition of the term "royalties" in paragraph 4 of that same article does not seem to contemplate the rental of an aircraft and accordingly I have some concern in advising clients that the reduced 10% rate is available. From our review of the Treaty it would appear that, rather, the rental of aircraft by a resident of Canada from a resident of Belgium would be subject to the general rate of 25% provided in Part XIII of the Canadian Income Tax Act.

I would appreciate your considering this situation and advising whether or not you concur with my reservations. On the other hand, if it is intended that the withholding tax rate be limited to 10% 1 would obviously appreciate your confirming this. If there is anything you would care to discuss further on this matter please do not hesitate to call.

Yours sincerely, XXXX