21 November 1989 Income Tax Severed Letter ACC8584 - Canada-India Income Tax Agreement

19(1)                                        HBW 4125 Il
                                             David R. Senécal
                                             613 957-2074

November 21, 1989

Dear 19(1)

Re Canada - India Income Tax Agreement (1985) (The "Agreement")

This is in reply to your letter dated September 15, 1989, which was referred to us by Mr. Jacques Sasseville of the Department of Finance.

In our capacity as Canadian Competent Authority, we acknowledge your confirmation that, pursuant to paragraph 4 of the Protocol to the Agreement and with reference to paragraph 2 of Article 13 of the Agreement, a reduced tax rate of 20% will apply to royalties or fees for technical services paid by a resident of India to a resident of Canada in respect of a right or property which is first granted, or under a contract which is signed, after December 12, 1988.

As the provisions of paragraph 4 of the Protocol to the Agreement apply on a unilateral basis to India, we are unable to confirm that the lower tax rate of 20% will also apply in the case of royalties and fees for technical services paid by a resident of Canada to a resident of India.

We have, however, brought this matter to the attention of officials at the Department of Finance who have indicated to us their willingness to propose a Remission Order under Canada's Financial Administration Act which would retroactively provide for the lower 20% rate in Canada.

In the meantime, Canada's domestic withholding rate of 25% will continue to apply. However, should the Remission Order receive approval of the Canadian government, residents of India will be eligible to apply for a refund.

Yours sincerely,

C. Savage A/Director Provincial and International Relations Division

c.c. Jacques Sasseville

c.c. Henry Lotin External Affairs

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