In 2013-0509771E5, the CRA confirmed that oil & gas royalties earned by a U.S. resident are subject to tax in Canada and no relief is available under the Canada-US tax treaty (Treaty). Such royalties constitute income from immovable property as contemplated under Article VI of the Treaty, which preserves Canada’s right to tax the income. Article VII of the Treaty does not apply because the income is described in another article of the treaty (i.e., Article VI). Article XII of the Treaty does not apply because oil & royalties are not captured by the definition of royalties in that Article. In Canada, the oil & gas royalties are subject to 25% withholding tax under Part XIII or are taxable under Part I if the U.S. resident carries on business in Canada through a permanent establishment (see s. 115(1)(a), Reg. 805, and Reg. 8201). The U.S. resident will also be subject to taxation in Canada if the U.S. resident either sells a Canadian resource property (s. 115(1)(a)(iii.1) & (iii.3)) or ceases to carry on a resource business in Canada (s. 115(4)). In all events, the Canadian payer will also have reporting and potential withholding obligations in Canada.