Income Tax Application Rules

Marginal note:Application of Part XIII of amended Act

• 10 (4) Where an amount is paid or credited by a person resident in Canada to a non-resident person

  • (a) who is resident in a prescribed country, and

  • (b) with whom the person resident in Canada was dealing at arm’s length,

  as, on account of, in lieu of payment of or in satisfaction of, interest payable on any bond, debenture, mortgage, note or similar obligation issued before 1976 by the person resident in Canada to the non-resident person, for the purposes of computing the tax under Part XIII of the amended Act payable by the non-resident person on the amount, the reference in subsection 212(1) of that Act to “25%” shall be read as a reference to “15%”.

• Marginal note:Certificates of exemption

  (5) Any certificate of exemption issued by the Minister under subsection 106(9) of the former Act that was in force on December 31, 1971 shall, for the purposes of subparagraph 212(1)(b)(iv) of the amended Act,

  • (a) be deemed to have been issued under subsection 212(14) of the amended Act; and

  • (b) be deemed

    • (i) in respect of interest payable on any bond, debenture or similar obligation acquired on or before December 31, 1971 by the person to whom the certificate was issued, to have been in force on January 1, 1972 and thereafter without interruption,

    except that if the person to whom the certificate was issued ceased at any time after 1971 to be exempt, under the laws of the country of which the person is a resident, from the payment of income tax to the government of that country, the certificate ceases to be in force

    • (iii) in respect of interest described in subparagraph (i), on the day on which the person first so ceased to be exempt.

• Marginal note:Limitation on non-resident’s tax rate

  (6) Notwithstanding any provision of the amended Act, where an agreement or convention between the Government of Canada and the government of any other country that has the force of law in Canada provides that where an amount is paid or credited, or deemed to be paid or credited, to a resident of that other country the rate of tax imposed thereon shall not exceed a specified rate,

  • (a) any reference in Part XIII of the amended Act to a rate in excess of the specified rate shall, in respect of such an amount, be read as a reference to the specified rate; and

  • (b) except where the amount can reasonably be attributed to a business carried on by that person in Canada, that person shall, for the purpose of the agreement or convention in respect of the amount, be deemed not to have a permanent establishment in Canada.