| 19(1) | File No. 5-9100 |
| C. Robb | |
| (613) 957-2744 |
January 2, 1990
Dear 19(1)
We are writing in response to your letter of November 16, 1989, requesting guidance on the subject of non-resident withholding tax on certain convertible debentures held by you on behalf of a non-resident of Canada.
Without reviewing the terms and conditions of each particular debenture, we are unable to comment on the withholding tax implications of the specific securities held in your depository. We do however offer the following general comments on subparagraph 212(1)(b)(vii) of the Income Tax Act (the "Act"), as it relates to convertible debentures.
The Department's position on this subject is outlined in Interpretation Bulletin It-361R2 a copy of which is enclosed for your information. As proposed section 6208 of the Income Tax Regulations (the "Regulations") has not to date been passed into law by an Order in Council, an obligation that is convertible into a prescribed security within five years of its issue does not qualify for the exemption from non-resident withholding tax provided by clause 212(1)(b)(vii)(E) of the Act. At this time, section 6208 of the Regulations is still in the proposal stage and we are unable to advise you regarding an expected date of adoption. However, once the proposed Regulation has been passed you should be entitled to a refund of withholding tax paid by you after December 19, 1986, on debenture convertible into prescribed securities.
We hope this is the information you require.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate