29 August 1988 Income Tax Severed Letter 5-6077 - [Canada-Brazil Income Tax Convention (the "Convention")]

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.

144A.03 O.S. Laurikainen (613) 957-2125

AUG 29 1988

Dear Sir:

Re: Canada-Brazil Income Tax Convention (the "Convention")

This is in response to your letter of May 17, 1988 wherein you have made enquiries concerning the application of Articles 10 and 22 of the above Convention.

In our view, for the purpose of assessing Canadian tax under Articles 10 and 22 of the above Convention the term "equity percentage" would bear the meaning found in paragraph 95(4)(b) of the Canadian Income Tax Act (the "Act"). Accordingly, where a company which is resident in Brazil is considered to be a foreign affiliate of a resident of Canada in accordance with paragraph 95(1)(d) of the Act, Article 22 of the Convention will apply to dividends paid by the foreign affiliate to the company resident in Canada. However, such application will be subject to the application of subsection 258(3) of the Act, proposed subsections 258(3) and (5) in Bill C-139 which received first reading in the House of Commons of Canada on June 30, 1988 and in certain circumstances the application of paragraph 95(6)(b) of the Act or the proposed section 245 of Bill C-139.

Since this definition of the term "equity percentage" is found in Canadian tax law, we are unable to comment on whether this same meaning would be employed by Brazilian authorities in interpreting the Convention.

We trust that this is the information you have requested.

Yours truly,

for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch