Will withholding tax be eliminated on interest paid between parties who are related or otherwise do not deal at arms length?
An amendment to the Canada-U.S. Tax Treaty was signed on September 21, 2007, and is expected to come into effect sometime in 2008. When this occurs, the rate of withholding tax will be reduced and eventually eliminated on interest paid by Canadians to related U.S. persons, provided they are residents of the U.S. for purposes of the treaty and satisfy the treatys new limitation on benefits rules. The existing treaty rate of 10% will be reduced to 7% for the whole of the calendar year in which the amendment comes into force, to 4% during the next calendar year, and to zero on January 1st of the following calendar year. Therefore, if the amended treaty comes into force during 2008, the tax will be eliminated on January 1, 2010.
Related Questions
- Will withholding tax be eliminated on interest paid between parties who are related or otherwise do not deal at arms length?
- How will cross-border loans benefit from the elimination of withholding tax on arms length interest payments?
- Is the elimination of withholding tax on arms length (unrelated party) interest retroactive?
