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.
CORPORATE MANAGEMENT TAX CONFERENCE
ROUND TABLE
JUNE 1993
Crown Forest
Question 6
In the decision of the Federal Court (Trial Division) in Crown Forest Industries Ltd. v. the Queen ( 92 DTC 6305), it was held that the plaintiff was entitled to the benefits of the Canada-U.S. Income Tax Convention (1980) (the "Convention") because it had a place of management in the United States even though it was not incorporated or taxed in the United States on its income. Does the Department agree that a non-U.S. corporation that is subject to tax in the United States on the basis that all its income is effectively connected with a trade or business carried on in the United States is entitled to the benefits of the Convention
Department's Position
The decision in the case of Crown Forest Industries Ltd. is under appeal. To be a resident of either Contracting State for the purpose of paragraph 1 of Article IV of the Convention a person must be liable to tax on its world income in that State by virtue of one of the criteria listed in paragraph 1 of that Article. The basis for the taxation of world income of a corporation under the Internal Revenue Code of the United States (the "Code") is place of incorporation. Corporations incorporated in the United States (Domestic corporations) are taxed under the Code on their world income and corporations incorporated outside the United States (non-U.S. corporations or as referred to in the Code as foreign corporations) are only taxed under the Code on income which is sourced in the United States. Therefore, non-U.S. corporations are not residents of the United States for the purposes of the Convention.
Prepared by: K.B. Harding
Date: June 2, 1993
Control #931415
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© Her Majesty the Queen in Right of Canada, 1993
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