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:
Whether the use of a public warehouse constitutes a permanent establishment.
Position:
Question of Fact
Reasons: n/a
TEI QUESTION - JUNE 1996 CONFERENCE
PERMANENT ESTABLISHMENT
Under paragraph 3 of the Interpretation Bulletin IT-177R2 dated May 4, 1984, Revenue Canada indicates that "a public warehouse that is used by a corporation, but that is neither owned by it nor under some measure of its control, does not constitute by itself a permanent establishment of the corporation".
In the following situation, may we please have Revenue Canada's views as to whether Corporation A has a permanent establishment because of its transactions with a Public Warehouse.
Corporation A manufactures goods in Canada which are sold directly to wholesalers across Canada. All carriers fees are paid by Corporation A. In order to improve its efficiency and to reduce its carrier costs, Corporation A signs a contract with an independent Public Warehouse for the storage of its goods. The in-coming shipments will be made twice a week while there will be around 50 out-going shipments a week. The instructions for shipments will be received from Corporation A. Also, on a periodic basis, the Public Warehouse confirms their stock on hand with Company A for control purposes.
DEPARTMENT'S POSITION
Whether or not a public warehouse constitutes a permanent establishment, as defined under Regulation 400, is a question of fact which can only be determined with full knowledge of all of the facts concerning a particular situation.
Based on the information provided in the situation described above, it is our initial view that the Public Warehouse may constitute a fixed place of business and a permanent establishment of Corporation A.
An example of a situation where the comment mentioned above in paragraph 3 of IT-177R2 could apply is as follows:
Corporation X is a retail company which sells its goods in Ontario. Corporation X purchases inventory in Alberta and rents space for storage of the inventory in a public warehouse in Alberta until the inventory can be shipped to Ontario for sale. If this is the sole business activity that Corporation X conducts in Alberta, it is our view that the rental of storage space in the public warehouse, in and by itself, would not constitute a permanent establishment to Corporation X in Alberta.
G. Middleton
April 26, 1996
File #5-961419
Applicable Sections: Regulation 400(2)
Subject:Whether the use of a public warehouse constitutes a "Permanent Establishment" under Regulation 400(2).
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