CRA publishes administrative relief for COVID-19 impact on international transactions and status
CRA referred to the travel restrictions imposed by governments or businesses in response to the COVID-19 crisis as a safety measure for their citizens or employees (the “Travel Restrictions”) and to the following administrative response of CRA (being a concession rather than an interpretive approach) which will apply from March 16 until June 29, 2020, unless extended:
- Days of physical presence in Canada solely because of the Travel Restrictions will not count towards an individual’s residency in Canada under the 183-day sojourning rule or the “common law” residency test, assuming a return to the country of residence when able.
- “[W]here a director of a corporation must participate in a board meeting from Canada because of the Travel Restrictions, the Agency will not consider the corporation to become resident in Canada solely for that reason” and similarly “where appropriate” for commercial trusts.
- CRA will not consider a non-resident entity to have a permanent establishment in Canada only because employees perform their duties in Canada solely as a result of the Travel Restrictions, or to have an "agency" PE solely due to a dependent agent concluding contracts in Canada where such activities would not have been performed in Canada but for the Travel Restrictions.
- Any days of physical presence in Canada due solely to Travel Restrictions will not count towards the 183-day presence test in "services PE" provisions (e.g., Art. V(9)(a) of the Canada-U.S. treaty).
- If a non-resident which is not resident in a treaty country can demonstrate that it has crossed the threshold of carrying on business in Canada only because of the Travel Restrictions, CRA “will consider whether administrative relief is appropriate on a case-by-case basis.”
- U.S. residents who exercise their employment in Canada solely as a result of the Travel Restrictions will not have those days count towards the 183 days referred to in Art. XV(2) of the Canada-U.S. treaty – with the same approach being applied in other Treaties.
- Where a request for a Reg. 105 or 102 waiver was not processed within 30 days due to COVID-19 interruptions in processing, CRA will not assess for failure to have withheld where the sole reason for not obtaining the waiver was this interruption and the person paying the amount can demonstrate having “taken reasonable steps to ascertain that the non-resident person was entitled to a reduction or elimination of Canadian withholding tax by virtue of an income tax treaty with Canada.”
- As the processing of s. 116 certificate requests was interrupted and processing has only resumed with a “limited capacity,” “urgent requests for comfort letters may be submitted on a temporary basis.”
Neal Armstrong. Summaries of Guidance on international income tax issues raised by the COVID-19 crisis, CRA Webpage 19 May 2020 under s. 2(1), Treaties – Income Tax Conventions – Art. 5, Art. 15, s. 2(3)(b), s. 153(1.1), Reg. 105(1), s. 116(1).