13 January 1993 Income Tax Severed Letter 9236957 - Carrying on Business in 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.

January 13, 1993

Regina District Office Rulings Directorate
D.L. Moorhouse J. Wilson
Chief of Audit

• (613) 957-2123

Attention: Linda Stykel

XXXXXXXXXX 923695

• We are writing in reply to your Round Trip Memorandum dated April 22, 1992 addressed to the International Taxation Office. The Round Trip Memorandum and the attached letter dated November 20, 1992 from XXXXXXXXXX, the taxpayer's representative, was received by this office on December 10, 1992. In the letter the representative wrote to your office requesting an opinion from Head Office concerning whether or not XXXXXXXXXX was "carrying on business" in Canada. As the situation involves a completed transaction, we have directed our reply to your office.

XXXXXXXXXX

• The question of whether or not a non-resident is carrying on business in Canada is one of fact. With respect to the issue of whether income received for the provision of medical services by a doctor, other than in his capacity as an employee, would constitute income from a business, we are of the opinion that such an activity clearly falls within the definition of "business" in section 248 of the Act. "Business" is defined in section 248 as follows:

"business" includes a profession, calling, trade, manufacture or
undertaking of any kind whatever and, except for the purposes of
paragraph 18(2)(c), section 54.2 and paragraph 110.6(14)(f), an
adventure or concern in the nature of trade but does not include an
office or employment (underlining for emphasis);

• In regard to the issue of whether medical services performed in Canada by a non-resident doctor will constitute "carrying on business in Canada", we are of the opinion that a doctor, other than in his capacity as an employee, is carrying on the business of providing medical services and any such services performed in Canada would constitute, for purposes of paragraph 2(3)(b) of the Act, carrying on business in Canada.
• We disagree with the representative's analysis that such activities, where carried out in Canada for only a short duration of time, would at best be described as an isolated transaction that does not constitute the carrying on of a business. In this regard, reference should be made to the following cases:
• 1. In Enterprises Blaton- Aubert SA v. MNR, [[1972] C.T.C. 609] 73 DTC 5009 (F.C.C.), a single transaction in Canada by a non- resident corporation was held to constitute carrying on business in Canada because it formed part of the normal business activities of the company. Noel A.C.J. makes the following comments:

"..... the object of the contract, ie, the construction of the Belgian
pavilion, was the execution of a type of work in line with the business
for which it was created and which it normally and usually performs in
its every day operations. The only difference, of course, is that here
they were operating far from their home base in a foreign country and
......"

• 2. In Placerfid LTD. v. MNR, [[1986] 1 C.T.C. 2449] 86 DTC 1327 (TCC), a single transaction was held to give rise to a profit that resulted from the carrying on of business (rather than from an adventure) where a corporation had been formed for the express purpose of salvaging the investment of the shareholders of a company that owned a commercial building that had been doing badly. The court found that the profit was realized from the pursuit of the actual objective of incorporation. Couture, C.J.T.C. made the following comments:

"Under such circumstances, it cannot be regarded as an isolated
transaction completely independent or divorced from its main business
activities...."

• Even though the above cases involve corporations, the principles established therein (ignoring the "corporate presumption" principle) would be relevant to individuals.
• We have not been provided with adequate facts to comment on the representative's comparison of XXXXXXXXXX situation to that of a non- resident computer technician performing services in Canada. However, generally speaking, our comments above concerning XXXXXXXXXX would apply equally to a non-resident providing computer services in Canada.
• We trust you will find the above comments to your satisfaction. for Director Reorganizations and Foreign Division Rulings Directorate Legislative and Intergovernmental Affairs Branch