In the context of a ruling request respecting a "tower" structure, a partnership of which two taxable Canadian corporations were the partners borrows money from a U.S. financial institution in order to acquire an interest in a U.S. limited liability company.
The CRA concluded that provided that the Partnership did not earn any income from sources in Canada, paragraph 212(13.1)(a) of the Act would not apply to deem the Partnership to be a person resident in Canada. However, this did not mean that withholding taxes under Part XIII of the Act would not be exigible in respect of the interest paid by the Partnership on the Loan to the U.S. financial institution.
…[T]aking into consideration the foreign law under which the Partnership was formed, the provisions of the partnership agreement and the terms and conditions of the loan agreement between the Partnership and the U.S. lender, the CRA came to the conclusion that the partners of the Partnership were considered to be the payers of the interest on the Loan. In other words, depending on the facts of a particular situation, one can look through a partnership to the partners as the persons who legally owe the debts of the partnership and pay the interest on such debts.