11 January 1990 Ruling HBW4125U31 F - Permanent Establishment in Canada of Non-resident Corporation

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.

January 11, 1990

Dear 19(1)

We are writing in reply to your letter of December 22, 1989 concerning paragraph 3 of Article V of the Canada-U.S. Income Tax Convention (1980).

In this regard you have asked us to confirm that where a non-resident corporation has several construction contracts with respect to multiple construction sites in Canada, we would not consider the corporation to have a permanent establishment in Canada for the purpose of Article V of the Convention solely on that basis.

It should be noted that the existence of a permanent establishment is determinable only by examining a number of factors many of which can be reviewed only after the fact. Consequently, in most cases the determination is made by the district office in the course of an audit.

Normally, in making such a determination, the Department would give consideration to the commentary on paragraph 3 of Article V in the Model Double Taxation Convention On Income and On Capital-Report of the OCED Committee on Fiscal Affairs 1977.  (A copy of this commentary is enclosed for your convenience.)  Although it may be generally stated that the twelve month test applies to each site or project, we would not necessarily ignore any other relevant data that may have a bearing on the application of the test.

We trust that this will be of assistance.

Yours sincerely,

C. SavageA/DirectorProvincial and International Relations Division

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