2 July 1991 T.I. (Tax Window, No. 5, p. 15, ¶1326)

General discussion.

The foreign country will be considered to grant substantially similar relief if it does not impose an income tax, or if the income from the operation of the ship or aircraft in international traffic is exempt from tax in that country.

The exemption does not apply to income from a dry lease or bare boat charter because such income is not income from the operation of a vessel.

Where a non-resident subsidiary of a Canadian corporation which owns or charters vessels to engage in international traffic and maintains a permanent establishment in Canada rather than abroad, it will earn exempt income which is not attributed to any country and therefore will be included in its pre-acquisition surplus.