Excluded Interest – The Post-Amble To Paragraph 212(1)(B)

Article by Chris Van Loan, ©2005 Blake, Cassels & Graydon LLP

This article was originally published in Blakes Bulletin on Taxation - April 2005

Most of the withholding tax exemptions relating to interest paid to non-residents contained in paragraph 212(1)(b) of the Income Tax Act (Canada) (the Act), including the 5/25 exemption, are subject to the limitations set out in the post-amble to paragraph 212(1)(b). The post-amble provides that where interest is payable on an obligation and "all or any portion of the interest is contingent or dependent on the use of or production from property in Canada or is computed by reference to revenue, profit, cash flow, commodity price or any similar criterion, or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation" interest on such obligation is deemed not to be interest that can be paid free of withholding tax pursuant to the relevant withholding tax exemption, including the 5/25