7 December 2000 External T.I. 2000-0059145 - Business Reserve Carrying Business Canada

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Whether partner of partnership that carries on business in Canada through a PE does the same.

Position: yes

Reasons: nature of partnership

									2000-005914
XXXXXXXXXX 								Denise Dalphy
(613) 957-9231
Attention:  XXXXXXXXXX 

December 7, 2000

Re: Subsection 34.2(6)

We are writing in reply to your letter dated November 28, 2000 wherein you inquire about whether a person is carrying on business in Canada through a permanent establishment within the meaning of paragraph 34.2(6)(a) of the Income Tax Act.

You have described a situation where a XXXXXXXXXX year old Canadian citizen who is married with children severed her residential ties with Canada and moved to XXXXXXXXXX on XXXXXXXXXX. The taxpayer will continue to be a partner in a XXXXXXXXXX law firm, but she will perform most of her work for the firm from her home; from time to time, the taxpayer will work in the XXXXXXXXXX office of the law firm. The taxpayer will not be a deemed resident of Canada.

Although you have asked for a technical interpretation, the scenario described seems to involve actual transactions. Should your situation involve actual taxpayers and completed transactions you may wish to submit all relevant facts and documentation to the relevant tax services office for their views. We are, however, prepared to offer the following general comments concerning the above scenario.

In a scenario where a partnership (general or limited) is carrying on business in Canada through a Canadian permanent establishment, it is our view that each of the partners, including any non-resident limited partners would be considered to be carrying on that same business in Canada through a Canadian permanent establishment. Where such a non-resident limited partner is carrying on business through a permanent establishment in Canada, subsection 805(1) of the Income Tax Regulations would apply with the result that there would be no Part XIII tax liability in respect of the non-resident's portion of the business income earned by the partnership. However, subsection 2(3) of the Act would apply such that a person who was not resident in Canada at any time in a taxation year would be subject to tax in that year under Part I of the Act on taxable income earned in Canada. The taxable income would be determined under section 115 of the Act. In this regard reference is made to paragraph 8 of Interpretation Bulletin IT-81R, paragraphs 1 to 5 of IT-420R3 and paragraph 53(c) of Information Circular 77-16R4.

The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R3, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Customs and Revenue Agency. Our practice is to make this specific disclaimer in all instances in which we provide an opinion.

Yours truly,

Steve Tevlin
for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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