23 August 1990 Ministerial Correspondence 900564 F - Permanent Establishment in Canada of a U.K. Corporation

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.

August 23, 1990

Dear Sirs:

Re:  Permanent Establishment in Canada of a United Kingdom Corporation

This is in reply to your letter of April 25 asking if, in our view, a U.K. Corporation maintains a permanent establishment (PE) in Canada and is, therefore, taxable under Part I and Part XVI of the Income Tax Act.  You state that facts as follows:

24(1)

24(1)

For purposes of the Canada-U.K. Income Tax Convention (the Convention) as stated in Article V thereof, the term permanent establishment means a fixed place of business in which the business of the enterprise is wholly or partly carried on. Furthermore, pursuant to subparagraph 2(c) of Article V, a permanent establishment shall include especially an office.  You have concluded from the above facts that your client A has a PE in Canada.

In order for A to have a PE in Canada the following conditions must be met;

i)     there must be a place of business;

ii)     the place of business must be fixed;

iii)     A must carry on business through the fixed place of business; and

iv)     the deeming provisions of paragraph 3 of the convention  must not apply. 

We agree based on the facts as presented that the first two conditions have been met.

24(1)  The degree of business activity and whether or not it forms an essential and significant part of the activity of 24(1) as a whole can only be determined through a complete analysis of the Canadian operations and the responsibilities and duties of 24(1) Canadian employees.

24(1)

In conclusion, while it remains a question of fact it is our view, based on the information provided that 24(1).

We hope that the above will be of assistance to you.

Yours truly,

for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch