Income Tax Severed Letters - 2012-09-07

Technical Interpretation - External

29 August 2012 External T.I. 2012-0433791E5 - Permanent Establishment

Unedited CRA Tags
Article V, Canada-US Treaty
counting of presence on personal business

Principal Issues: How do you compute days present in the U.S. for purposes of subparagraph 9(a) of Article V of the Treaty.

Position: Total number of days present in the U.S. in any twelve month period provided that the period includes the days on which services were actually performed in the U.S.

Reasons: See the Technical Explanation to the 2007 Protocol to the Treaty

27 August 2012 External T.I. 2011-0416181E5 - US internet publisher - CDN resident advertiser

Unedited CRA Tags
212(1)(d); Canada-US Income Tax Convention

Principal Issues: Is the fee paid by a resident of Canada to a US publisher to advertise on its website subject to withholding tax pursuant to either of subparagraphs 212(1)(d)(i) or (iii) Act and, if so, would the Treaty apply to reduce or eliminate such withholding tax?

Position: Yes, 212(1)(d)(iii) would apply and yes, Treaty relief would be available to the extent the US Publisher had no PE in Canada.

Reasons: In our view, there would be a sufficient link between the fee and the benefit to be derived from the services to be performed by the US Publisher and those services would not be in connection with the sale of property or the negotiation of contracts. The Fee would fall under Article VII (Business Profits) of the Treaty and the business profits of a resident of the United States shall be taxable only in United States unless the resident carries on business in Canada through a PE situated in Canada.

27 August 2012 External T.I. 2012-0438001E5 - Taxable Benefits – Employer-Provided Vehicles

Unedited CRA Tags
6(1)(a); 6(1)(e); 6(1)(k); 6(6)

Principal Issues: 1. Whether a taxable benefit would arise in connection with an employee’s use of an employer-provided vehicle. 2. Is there a requirement for employees to maintain daily driving logs to support the personal and business use of a vehicle?

Position: 1. Yes. A taxable benefit will arise with respect to the personal use of an employer-provided motor vehicle. 2. No. However, some form of documentation is required.

Reasons: 1. Where the motor vehicle is an “automobile” as defined in subsection 248(1), a standby charge and operating benefit will arise under paragraphs 6(1)(e) and 6(1)(k) with respect to the personal use. Where the motor vehicle is not an “automobile”, a taxable benefit will arise under paragraph 6(1)(a) with respect to any personal use. 2. While the Act does not set out specific documentary requirements for recording the usage of a vehicle, the general rule is that an individual must retain records that would enable an objective determination of business/personal usage as noted in Guide RC4409.