The appellant sought to recover withholding tax on a guarantee fee paid by the respondent to a non-resident German bank.
The appellant argued that a 1974 amendment to the Income Tax Act deemed such guarantee fees to be interest, thereby subjecting them to withholding tax.
The Supreme Court of Canada held that the 1974 amendment did not override the Canada-Germany Income Tax Agreement Act, 1956, which exempted the non-resident bank's commercial profits from Canadian taxation.
The appeal was dismissed, confirming that the guarantee fees were not taxable as interest under the treaty.
