CRA finds that a non-resident airline with a PE in Canada was not subject to the domestic minimum top-up tax under the GMTA

Was the domestic minimum top-up tax under Part 3 of the Global Minimum Tax Act (GMTA) imposed on a multinational constituent entity (CE) resident in a treaty jurisdiction (Jurisdiction A) that had a branch (a place of business) in Canada that it used in connection with its international airline business?

As an entity other than a flow-through entity, the CE was a tax resident in Jurisdiction A based on its place of management or creation and was, therefore, for GMTA purposes “located” in Jurisdiction A pursuant to s. 5(1) of the GMTA. However, under ss. 11(1)(b) and (2) of the GMTA, a permanent establishment (PE) of the CE that was located in Canada under the PE-location rules in s. 5(3) would itself be a separate CE in Canada.

Regarding para. (a) of the PE definition in s. 2(1), the air-traffic exemption in Art. 8 of the Treaty meant that it could not be said that Canada taxed the income attributable to the place of business in accordance with provisions similar to Article 7 of the OECD Model Convention. Additionally, paras. (b) to (d) of the PE definition also appeared inapplicable. Since the place of business would not be a PE under s. 2(1), it would not be deemed to be a separate CE under s. 11(1)(b) and (2). Accordingly, Part 3 tax liability also would not arise under the PE rules.

Neal Armstrong. Summary of 29 December 2025 External T.I. 2025-1078091E5 under GMTA s. 5(3).