Canadian Tax Consultant Chartered Accountant International Tax Consultant Canadian Tax Professional Canadian Tax Accountant Michael Atlas - Canadian Tax Consultant US Tax Consultant
Michael Atlas - Canadian Tax Consultant
ABOUT MICHAEL ATLAS - A comprehensive summary of Michael Atlas' professional background and experience, as well as a listing of his extensive writings in the tax field AREAS OF PRACTICE - A description of the areas of tax practice in which he has extensive interest and expertise PROFESSIONAL FEES - Information on Michael Atlas' general approach to fees CANADIAN TAX GUIDE FOR NON-RESIDENTS - A useful summary of the application of Canadian tax rules for non-residents earning income from Canadian sources-includes analysis by type of income and application of major tax treaties CONTACTING MICHAEL ATLAS - Everything you need to know about contacting Michael Atlas
ABOUT MICHAEL ATLAS - A comprehensive summary of Michael Atlas' professional background and experience, as well as a listing of his extensive writings in the tax field
AREAS OF PRACTICE - A description of the areas of tax practice in which he has extensive interest and expertise
PROFESSIONAL FEES - Information on Michael Atlas' general approach to fees
CANADIAN TAX GUIDE FOR NON-RESIDENTS - A useful summary of the application of Canadian tax rules for non-residents earning income from Canadian sources-includes analysis by type of income and application of major tax treaties
CONTACTING MICHAEL ATLAS - Everything you need to know about contacting Michael Atlas

INTEREST

RULES UNDER THE INCOME TAX ACT

General Rules

Effective January 1, 2008, arm's length interest charges will generally be exempt from non-resident withholding tax.

RULES UNDER CANADA'S TAX TREATIES

Jurisdiction To Tax

Canada's tax treaties generally allow Canada to tax interest paid by Canadian residents to non-residents, although complex sourcing rules will often come into play.

Often these rules will preclude Canada from taxing interest paid between non-residents even if such income is allowed as a deduction against Canadian-source income.

In addition, the definition of "interest" in those treaties is generally broad enough to include deemed interest, such as guarantee fees, although the treaty with Germany seems to be a notable exception in that regard.

Rates Of Tax

Canada's tax treaties generally lower the rate of tax that Canada may levy on interest payments to either 10% or 15%. The rates applicable to certain major countries are outlined below. Since there will generally be no non-resident withholding tax on interest payments after 2007, these rates will only be applicable in connection with payments between non-arm's length parties.

COUNTRY RATE
France 10%
Germany 10%
Italy 15%
Japan 10%
Netherlands 10%
Switzerland 15%
United Kingdom 10%
United States 10%-note under the Fifth Protocol that was released on September 21, 2007, Canada-U.S. cross-border interest charges will be completely eliminated even for non-arm's length payments. For arm's length interest, the elimination will be completely effective as at January 1, 2008.For non-arm's length interest charges, there will be a phased in elimination under which a 7% and 4% rate will apply during the 1st and 2nd year after implementation, respectively.