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: International Shipping Corporations and Regulations 5906 and 5907
This is in reply to your letter dated August 2, 1991 in respect of the above-noted matter.
You have asked for our views as to where the earnings of a non-resident corporation attributable to a permanent establishment situated in Canada will be attributed under Regulations 5906 and 5907 if such earnings are exempt from tax in Canada by virtue of paragraph 81(1)(c) of the Act.
Our Comments
Notwithstanding that a foreign affiliate carries on its business through a permanent establishment situated in Canada, by virtue of Regulation 5906(1)(b), none of the income that is exempt fromCanadian tax under paragraph 81(1)(c) shall be attributable to a Canadian permanent establishment for purposes of Part LIX of the Regulations. If the foreign affiliate has a permanent establishment in respect of its international shipping business in the country in which it is resident, its income (that is exempt from Canadian tax) that would be attributable to its permanent establishment in Canada (but for Regulation 5906(1)(b)) shall, by virtue of Regulation 5907(1)(a), be deemed to be attributed to the permanent establishment in the country in which it is resident. If the foreign affiliate has no permanent establishment in respect of its international shipping business in the country in which it is resident, the income (that is exempt from Canadian tax) that would have been attributable to its permanent establishment in Canada (but for Regulation 5906(1)(b)) shall not be attributed to any country and will not be included in exempt or taxable earnings
It is essentially a question of fact, having regard to the definition in the applicable income tax convention or, if there is no applicable convention, Regulation 400(2), as to whether a corporation has a permanent establishment in respect of its international shipping business in the country in which it is resident. Having regard to the requirement that the permanent establishment be in respect of its international shipping business, i.e. that some part of the international shipping business in respect of which the corporation is entitled to exemption from Canadian tax under paragraph 81(1)(c) of the Act be carried on in the country in which the corporation is resident, the mere maintenance of a registered office (utilizing a local firm of lawyers or accountants) would likely not, in and by itself, constitute a permanent establishment in respect of the corporation's international shipping business.
Yours truly,
for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
c.c. D. McFadyen Department of Finance
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1991
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1991
Email this Content