CRA finds that the “six months” test in Art. 5(3)(b) of the Mexico Treaty should be day-counted (more than 183 days)

Art. 5(3)(b) of the Mexico-Canada Convention provides that a “permanent establishment” includes:

(b) the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only if activities of that nature continue (for the same or a connected project) within a Contracting State for a period or periods aggregating more than six months within any twelve month period

Regarding how “six months” should be computed, the Directorate stated:

Considering that the testing period of six months is not required to be consecutive, the only reasonable interpretation of the term “periods aggregating more than” six months within any twelve month period” is to aggregate the number of days equivalent to the number of months.

This interpretation is quite similar to 23 November 2023 Internal T.I. 2020-0850381I7 (issued two days later), finding 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.

Neal Armstrong. Summary of 21 November 2023 Internal T.I. 2021-0880101I7 under Treaties – Income Tax Conventions – Art. 5.