14 September 1993 External T.I. 9316555 F - Common Carrier With P.E. in Cda

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.

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Attention  XXXXXXXXXX

Dear Sirs:

RE:  PARAGRAPH 4, ARTICLE VIII OF THE CANADA-U.S. 1980 TAX CONVENTION

You have requested our views with respect to the interpretation and application of paragraph 4 of Article VIII of the Canada-U.S. Tax Convention ("Convention"), as it applies to the profits of a U. S. resident engaged in the operation of motor vehicles as common carrier with a permanent establishment in Canada. We understand the common carrier transports property between Canada and the United States and vice - versa ("international traffic")

We agree that since paragraph 4 of Article VIII overrides Article VII of the Convention, the profits derived by the U.S. resident with respect to such international traffic, would be exempt from tax in Canada. It should also be noted that the profits considered to be exempt from tax under Article VIII must be those that arise only from international traffic and not from other activities of the permanent establishment.

We trust the above is adequate for your purposes.

Yours truly,

for DirectorReorganizations and Foreign DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch