A large percentage of countries that have income taxes levy withholding taxes on interest paid by residents of those countries to non-residents.
Up until fairly recently, Canada generally applied withholding tax under Part XIII of the Income Tax Act (“the Act”) on Canadian-source interest payments to non-residents. This general rule was subject to many exceptions, including one commonly used one that applied to five-year corporate debt, as well as exception for government obligations and foreign currency debt. In the absence of a lower rate being applied under a tax treaty, interest that was not eligible for an exemption was subject to 25% tax.
However, that all changed in 2008. As a general rule, Canadian-source interest payments Read more