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.