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.
Principal Issues:
Defintion of paragraph 402(4)(d) of the Regulations. Allocation of income where taxpayer has two P.E's. in two different provinces.
Position TAKEN:
Paragraph 402(4)(d) applies.
Reasons FOR POSITION TAKEN:
Situation is in accordance with wording of paragraph 402((4)(d).
March 30, 1995
Regina Tax ServicesManufacturing Industries,
A. R.KellettPartnerships and Trusts
DirectorDivision
F.B. Fontaine
Attention: Leonard Serdachny
Large Case Files Section
7-950610
XXXXXXXXXX
Provincial Allocation Formula
This refers to our telephone conversation (Fontaine/Serdachny) concerning a letter addressed to the Calgary District Office from XXXXXXXXXX (copy attached) with regard to the interpretation of paragraph 402(4)(d) of the Income Tax Regulations (the "Regulations"). It was agreed that our reply to the letter should be addressed to you rather than the Calgary D.O. because you are engaged in an audit of XXXXXXXXXX and have been involved in discussions with the writer of the letter regarding the subject matter.
The letter expresses the following concerns:
1.Paragraph 402(4)(d) of the Regulations appears to be applicable to situations where a customer instructs that goods sold to it be shipped to some other person in another jurisdiction and the customer's office from which the sale was negotiated is located in a province or country in which the vendor corporation has a permanent establishment. In such situations, gross revenue is attributable to the permanent establishment in that province or country, notwithstanding the vendor may also have a permanent establishment in the jurisdiction of destination.
2.Suppose XXXXXXXXXX has permanent establishments in Alberta and British Columbia and a sale is negotiated in XXXXXXXXXX customer's office in Alberta requiring delivery of goods to a third party in British Columbia. Would the sale be attributed to Alberta because of Regulation 402(4)(d)?
3.Does the wording in Regulation 402(4)(d) suggest that shipments made to "some other person" necessarily requires a change in title of the goods to that other person?
Our comments are as follows:
(1)We agree with the comments made in paragraph 1 and answer in the affirmative to the question posed in paragraph 2.
(2)With regard to paragraph 3, the question of transfer of title to goods to "some other person" by "a customer" described in paragraph 402(4)(d) of the Regulations is not contemplated under that paragraph. Such question would depend on the terms of the contract between the customer and that other person. Accordingly, where the requirements of paragraph 402(4)(d) of the Regulations, as described in paragraph 1 above, are met, that particular question would be irrelevant for the purposes of that paragraph.
We hope our comments will assist you in responding to Western's concerns.
for Director
Manufacturing Industries, Partnerships
and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
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, 1995
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, 1995
Email this Content