Canco entered into a “Financial Services Agreement” with a non-resident Advisor who agreed to provide assistance respecting a proposed sale of Canco or its business including analyzing the business, marketing Canco and its business, coordinating the data room and due diligence by potential purchasers, evaluating purchase proposals, and structuring and negotiating the sale.
At Canco’s request the Advisor will meet with Canco’s board of directors to discuss the proposed Sale.
Respecting the applicability of Reg. 105 withholding to fees paid to the Advisor or its affiliates, the Directorate stated:
[I]t would appear that at least some of the services, particularly meeting with the Board of Directors would be provided in Canada. As noted in paragraph 32 of Information Circular 75-6R2,
“The portions allocated to the services to be performed inside and outside Canada must be clearly expressed either within the contract or through the related information and documents. It is the responsibility of the non-resident and the payer to determine the proper value of these amounts.”