25 March 1977 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.

J.R. O'Hara

March 25, 1977

Your letter dated December 16, 1976 to Mr. A. Short was passed on to us for reply since the responsibility for carrying out the provisions of the Income Tax Conventions, once they have come into force, rests with this department. I would like to apologize for the delay in responding to your letter.

We had the draft executive order which you sent us translated into English and have made some changes thereto. A copy of the translation is attached showing areas which we have changed, as well as a revised order incorporating the changes. On page 3 there is a section on "Exemption from Taxation at Source in Canada". Some of the income exempted in the treaty is already exempt under our law. Consequently, the payor would not be required to withhold tax when making payments of such income in Austria. We do have a form, KR602, for use under limited circumstances. A copy of the form is attached, and there is an outline on the form of when it is to be used. When a Canadian payor makes a payment to a person in Austria which qualifies for exemption under either Article XI or XII of our Income Tax Convention he need not withhold tax, even though he has received no other certification of exemption. If the Austrian recipient encounters resistance from the Canadian payor, we will see that he receives a letter establishing his entitlement to exemption from the withholding tax. After considering these comments you may wish to rewrite section 2 and 3 (Paragraph 1) or delete them entirely.

A copy of Information Circular IC-72-9 is enclosed for your reference, and I would draw your attention to the section headed up "Non-Residents Exempt From Some or All of the Taxing Provisions of the Act, the Extent and Evidence of Exemption" starting on page 4. There is a further section on pages 8 and 9 - paragraphs 25 and 27 which you may be interested in. Part II of the circular discusses how a non-resident applies for a refund when excessive tax has been withheld at source. A copy of our form NR7-R and NR4 Supplementary are also enclosed.

Your may be interested in our Information Circular 76-12 which is also enclosed. This resulted from our concern that persons not entitled to the beneficial rates of tax provided in our tax agreements might use a nominee in a treaty country and obtain preferential rates of tax on his income.

On the R-CDN-1 there is a place for certification by the Canadian Taxation Author. We are only prepared to certify the residence of the applicant and we have adjusted the form accordingly.

If, after reviewing the material we have enclosed, you would like some clarification, please do not hesitate in contacting us. If would be nice if we could resolve any problems before the treaty comes into force, and your initiative taken in this respect is certainly appreciated.

Yours sincerely,

Acting Director Provincial and International Relations Division

Enclosures