Main questions: On the basis of a hypothetical situation, which two companies are required to submit the agreement in accordance with subsection 78 (1) (b) and what is the correct withholding tax rate on the interest supposedly paid to the non-resident company? In addition, does the withholding tax have to be paid if the interest is actually paid to another non-resident corporation, which is fiscally transparent in the United States? Subsection 78(1)(b) requires that the agreement be submitted by “. the taxable person and the person with whom the costs are incurred… In your situation, the unpaid amount is an interest charge for year 1 owed by Company A to Company B. Therefore, on the basis of the wording of Article 78(1)(b), the agreement between the taxable person (company A) and that person (company B) must be submitted. Based on these facts, you are seeking confirmation that Company A is required to submit the agreement pursuant to Subsection 78(1)(b)(i) to Company B; that the withholding tax rate is 4% and that no withholding tax should be paid if company A actually pays the interest to company C. 3. An agreement shall be submitted in a prescribed form for the purposes of this Section for an amount described in Article 78(1) and which a taxable person owes to a person after the date or before which the agreement is necessary. For the purposes of subsection 78 (1) (b), both subsections 78(1) and (b) apply to that amount, unless subsection 78 (1)(a) is to be read and interpreted so that only 25% of that amount is included in computing the taxable person`s income. 4. Where an amount for the expenses of a taxable person which is an old-age pension or a pension, a retirement allowance, a salary, a salary or another allowance (with the exception of a reasonable holiday or leave allowance or a deferred amount under a salary redeployment agreement) is not paid for an office or employment on the day which is 180 days after the end of the tax year: in which the expenses were incurred, for the purposes of this Act, with the exception of this subdivision, the amount is not considered to be an expense in the year and is considered to be an expense in the fiscal year in which the amount is paid. (i) the amount so not paid shall be deemed to have been paid by the taxable person and received by that person on the first day of that third tax year, and Article 153, with the exception of paragraph 153(3), shall apply in so far as it would be applicable if that amount were paid by the taxable person to that person. and this form must be used by a debtor and a creditor who wish to submit an agreement with Revenu Québec on an unpaid amount in respect of an expense incurred during the preceding year and that has been deducted in computing the debtor`s income.
Where an agreement is filed in accordance with subsection 78 (1) (b), the interest payment is deemed to be made to Company B on the first day of year 4. Company B is a related U.S. citizen who is not fiscally transparent in the United States. Therefore, Canada-United States. The tax treaty applies and the reduced rate of withholding tax applicable for year 4 applies to the accepted interest payment. . . .