31 August 1995 External T.I. 9518285 - EXPORT-IMPORT BANK OF U.S.

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

XXXXXXXXXX 								951828
S. Leung
Attention:  XXXXXXXXXX 

August 31, 1995F

Dear Sirs:

Re: Canada-United States Income Tax Convention (1980)
Guaranteed Financing by the Export-Import Bank
of the United States (the "Eximbank")

We are writing in response to your letter of June 16, 1995 to XXXXXXXXXX. That letter referred to your other letter of April 19, 1995 in which you requested the Department's view as to whether paragraph 3(b) of Article XI of the Canada-U.S. Income Tax Convention (1980) (the "1980 Convention") would apply to interest paid with respect to a debt obligation guaranteed by the Eximbank in connection with financing of the purchase of XXXXXXXXXX In this regard, you referred to a letter issued by XXXXXXXXXX, dated January 24, 1984, (the "January 24, 1984 letter") which you stated did not consider the possible application of Article XI of the 1980 Convention.

As your situation represents an actual situation, you should contact the appropriate Tax Services Office with respect to the tax consequences of an actual transaction. However, we can offer the following general comments.

Provided that a debt obligation was issued at arm's length by the beneficial owner of the interest who is a resident of the U.S. for purposes of the 1980 Convention and such debt obligation was guaranteed or insured by the Eximbank which is an instrumentality of the U.S. not subject to tax by the U.S., it is our view that the interest paid with respect to such debt obligation to the beneficial owner would be exempt from Canadian taxation by virtue of paragraph 3(b) of Article XI of the 1980 Convention.

As you may know, the Canada-U.S. Reciprocal Tax Convention (1942) did not contain a provision similar to paragraph 3(b) of Article XI of the 1980 Convention. At the time the January 24, 1984 letter was written, the 1980 Convention had not yet been ratified (It was later ratified on August 16, 1984). It is probably because of this that the exemption provided in paragraph 3(b) of Article XI of the 1980 Convention was not mentioned in the January 24, 1984 letter.

We trust you will find the above to be of assistance.

Yours truly,

for Director
Reorganizations and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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