| November 5, 1990 | |
| Non-Resident Taxation Division | Rulings Directorate |
| K. Hillier | K.B. Harding |
| Director | 957-2130 |
| 903020 |
SUBJECT: Copyright Royalties and Cable Company Retransmissions
This is in reply to your memorandum of October 30, 1990 wherein you requested we review the opinion expressed therein with respect to the treatment of payments to be made by cable companies and other re-transmitters to U.S. residents for the right to retransmit distant television and radio signals.
We are in agreement that an argument can be made that the royalty payments made to U.S. residents in respect of the right to retransmit distant signals are exempt from withholding tax in Canada under subparagraph 212(1)(d)(vi) of the Income Tax Act (the "Act"). However, since subsection 212(5) of the Act is more specific than paragraph 212(1)(d) of the Act, the former subsection will have precedence.
It is our view that where the Canadian cable TV companies pick up distant signals which are transmitted from films or video tape, any payments made in respect of the retransmissions of such signals will fall within the wording of paragraph 212(5)(b) of the Act as payments for the use of "a film, video tape or other means reproduction for use in connection with television". In the case where live broadcasting of a sporting or other events are retransmitted, we are of the view that such payments will fall within the words "or other means of reproduction for use in connection with television" used in paragraph 212(5)(b) of the Act.
Article XII of the Canada-U.S. Income Tax Convention permits Canada to tax such royalty payments made to U.S. residents, however, the rate of withholding tax on such payments is limited to 10% of the gross amount of the royalty payments.
21(1)(b)
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