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.
Corporate Management Tax Conference
Canada-U.S. Income Tax Convention: Permanent Establishment & Independent Agent
Question 5
Under the Canada-U.S. Income Tax Convention, a resident of the U.S. is not deemed to have a permanent establishment in Canada merely because the U.S. resident carries on business in Canada through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. The OECD commentary states that a subsidiary company would not be considered dependent on its parent company solely because of the parent company's ownership of the share capital of the subsidiary.
Does the Department follow the OECD commentary so that a wholly-owned subsidiary can be an independent agent for purposes of the permanent establishment provisions of Canada's tax treaties? In general, will the Department follow the OECD guidelines for determining whether an agent operating in Canada is of an independent status?
Department's Position
While it is possible for a wholly-owned subsidiary to be an independent agent of its non-resident parent company, there are no precise tests to determine whether a person is an independent agent of another person.
In order to make such a determination, the Department will use the OECD commentary as an interpretive aide.
G. Middleton
June 14, 1993
File #5-931427
Doc. Type "9"
Applicable Sections: Article V of the Canada-U.S. Income Tax Convention and Article 5 of the OECD Model Convention.
Subject: Permanent Establishments and Independent Agents
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