{"id":936,"date":"2013-10-21T16:37:13","date_gmt":"2013-10-21T16:37:13","guid":{"rendered":"https:\/\/thor.ca\/\/blog\/?p=936"},"modified":"2013-10-22T16:20:05","modified_gmt":"2013-10-22T16:20:05","slug":"cra-issues-another-favorable-dividend-ruling-under-canada-us-tax-treaty","status":"publish","type":"post","link":"https:\/\/www.thor.ca\/blog\/2013\/10\/cra-issues-another-favorable-dividend-ruling-under-canada-us-tax-treaty\/","title":{"rendered":"CRA issues another favorable dividend ruling under Canada-US tax treaty"},"content":{"rendered":"<p>In <a href=\"http:\/\/thor.ca\/blog\/wp-content\/uploads\/2013\/10\/2012-0467721R3.pdf\">2012-0467721R3<\/a> (released October 16, 2013), the CRA ruled that a deemed dividend paid by a Canadian unlimited liability company (ULC) to a US parent company qualified for the 5% withholding tax rate under the Canada-US tax treaty (Treaty).  The ruling is not a new development, but is a useful reminder of a cross-border trap: a fiscally transparent ULC cannot simply pay an ordinary dividend to its US parent (US Co) without attracting 25% Canadian withholding tax on that dividend.  The reason is Article IV(7)(b) of the Treaty, which technically denies the beneficial 5% Treaty withholding tax rate on the ordinary dividend paid to US Co.  In this latest ruling, the CRA confirmed that the 5% withholding tax rate is available if, instead of a simple $100 dividend, the ULC (1) resolves to increase its paid-up capital by $100 (e.g., capitalizes $100 of retained earnings under the applicable corporate statute), and (2) subsequently resolves to reduce its paid-up capital by $100 and make a corresponding $100 payment to US Co on this reduction.  For Canadian tax purposes, a $100 deemed dividend arises in step (1), and Article IV(7)(b) does not apply to prevent US Co from accessing the 5% withholding tax rate on this deemed dividend.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In <a href=\"http:\/\/thor.ca\/blog\/wp-content\/uploads\/2013\/10\/2012-0467721R3.pdf\">2012-0467721R3<\/a> (released October 16, 2013), the CRA ruled that a deemed dividend paid by a Canadian unlimited liability company (ULC) to a US parent company qualified for the 5% withholding tax rate under the Canada-US tax treaty (Treaty).&hellip;<\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-936","post","type-post","status-publish","format-standard","hentry","category-corporate-tax"],"_links":{"self":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/936","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/comments?post=936"}],"version-history":[{"count":0,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/936\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/media?parent=936"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/categories?post=936"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/tags?post=936"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}