20 February 1991 Ministerial Letter 903688 F - Canada-U.K. Treaty and Other Treaties - Business Profits

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.

Dear Sirs:

Re:  Canada - U.K. Treaty (and other Treaties with no "Other Income" Article)

This is in reply to your letters of November 20 and December 4, 1990 to Mr. Hartwick of the Non-Resident Taxation Division concerning the taxation of an individual who under Canadian tax law is resident in Canada, under United States tax law is resident in the United Kingdom and under the Canada-United Kingdom Income Tax Convention (the "U.K.  Treaty") is resident in the United Kingdom (a "dual resident") in respect of certain items of income, e.g. interest, dividends, royalties, pensions, having a source in a third country other than Canada or the United Kingdom.  Your inquiry also relates generally to other Income Tax Conventions to which Canada is a party that do not include an "Other Income" Article comparable to Article XXII of the Canada-United states Income Tax Convention, 1980.

We note that in certain cases the "Business Profits" Article of the applicable Income Tax Convention will deal with the matter raised by you.  For example, in the case of a "dual resident", if the taxpayer's interest income arising in the United Kingdom or in a third country constitutes profits of an "enterprise carried on by" the taxpayer, Article 7 of the U.K. Treaty would effectively prohibit Canada from imposing tax on such interest unless it was attributable to a permanent establishment of the taxpayer situate in Canada.  However, most often the income in question will likely not constitute profits of an enterprise carried on by the taxpayer and thus Article 7 will not apply.

In other cases of the kind described above in the first paragraph of this letter, the Canadian competent authority will consider granting relief `from Canadian taxation pursuant to paragraph 3 of Article 23 of the U.K. Treaty (or the comparable provision of the applicable Income Tax Convention if a Convention not having an "Other Income" Article other than the U.K. Treaty is applicable).  Generally, favourable consideration of granting such relief will only be given where the income has been taxed by the Other Contracting State in which the taxpayer is resident such that a case of "double taxation" in fact exists.  These situations can and will only be considered on a case by case basis.

Competent Authority requests of this nature should be addressed to the Director, Provincial and International Relations Division, Revenue Canada, Taxation, 875 Heron Road, Ottawa, Ontario, K1A OL8.

Yours truly,

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

c.c. Joe Hartwick Chief of Assessing Non-Resident Taxation Division Revenue Canada, Taxation