Significant Developments in Canadian Taxation
by RUSSELL E. MCKAY Principal, Deloitte, Plender, Haskins & Sells, Toronto
THE MINISTER OF FINANCE of the Government of Canada was particu-
larly busy during the last twelve months in that he has presented two budget addresses, the first on December 20, 1960 and the second on June 20, 1961.
The amendments to the Act resulting from his activity have been numerous, and a greater than usual number apply to non-residents of Canada.
The more important amendments are as follows:
Effective December 20, 1960, dividends paid by a Canadian subsidiary
to its United States parent are subject to a 15% withholding tax instead of the former rate of 5%.
In order to implement this change, it was necessary to amend the Canada-United States Reciprocal Tax Convention. The increased withholding applies to all dividends paid subsequent to December 20, 1960 so that even dividends declared prior to but payable subsequent to that date are subject to the higher rate.
At the present time then, the 15% rate of withholding tax applies to all dividend payments to a non-resident except where an international
agreement still prevails providing for a lower rate; e.g., the Canada—United Kingdom Tax Agreement still provides that dividends
paid by a wholly owned Canadian subsidiary to its United Kingdom parent are exempt from withholding tax. As yet there has been no official announcement concerning the re-negotiation of this agreement.
Also effective December 20, 1960, certain interest payments that previously attracted a 5% withholding tax became subject to tax at 15%.
These payments fell into three main categories:
Presented before the Haskins & Sells Annual Tax Conference, New York — October 1961
Interest on Government of Canada bonds, Interest on bonds of the Provinces of Canada, and