CRA indicates that the 3-month threshold for a drilling rig to be a PE under the Canada-US Treaty is counted based on days of consecutive or non-consecutive use including standby time

Art. V(4) of the Canada-U.S. Treaty provides that a permanent establishment exists in a Contracting State if the use of an installation or drilling rig or ship in that State to explore for or exploit natural resources is for more than three months in any twelve-month period. CRA indicated:

The three-month period is tested by counting the days of use, which need not be consecutive, provided they total to the three months.

Preparation time does not count as “use,” whereas standby time, i.e, “generally a temporary pause from operation that could be caused, for example, by severe weather, or shortage of labour” is counted as use on the basis that a “temporary interruption should not change the status that the installation or drilling rig or ship in question is being utilized in the business.”

Neal Armstrong. Summary of 23 November 2023 Internal T.I. 2020-0850381I7 under Treaties – Income Tax Conventions – Art. 5.