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.
Principal Issues: Would the CRA be prepared to reconsider its view on the meaning of an agent for purposes of paragraphs 400(2)(b) and 2600(2)(a) of the Regulation?
Position: Yes.
Reasons: Sufficient support exists for using the legal meaning of the word "Agent".
CTF 2011 Round Table November 2011
Q.26 - Permanent Establishment in a Province through an Agent Public Warehouses
Q: Paragraph 400(2)(b) of the Income Tax Regulations ("Regulation") deems a corporation, for provincial allocation purposes, to have a permanent establishment in a particular place where the corporation in that place carries on business through an agent who has a stock of merchandise owned by his principal from which he regularly fills orders which he receives. Also, paragraph 2600(2)(a) of the Regulation deems an individual, for provincial allocation purposes, to have a permanent establishment in a particular place where an individual carries on business through an agent who has a stock of merchandise owned by his principal from which he regularly fills orders which he receives. For many years, the CRA has in this context ascribed an ordinary meaning to the word "agent", being one who is authorized to act for or in place of another. This view of the meaning of the word "agent" is sufficiently broad that a public warehouse that acts only to store and ship goods for a particular corporation would typically be deemed to be a permanent establishment of that corporation for provincial income allocation purposes.
In its 2010 decision in Canada v. Merchant Law Group, 2010 FCA 206, the Federal Court of Appeal stated at paragraph 17 that: "it is settled at common law that for an agency relationship to exist the agent must be able to affect the principal's legal position with third parties by entering into contracts on the principal's behalf or by disposing of the principal's property."
Having regard to these and to similar comments in other cases, would the CRA be prepared to reconsider its view of the meaning of an agent for purposes of paragraphs 400(2)(b) and 2600(2)(a) of the Regulation?
A: We are of the opinion that sufficient support exists for using the legal meaning of the word "agent" in situations involving allocation for provincial income tax purposes and the CRA is prepared to change its position on a prospective basis. As such, allocations for provincial income tax purposes for taxation years ending in 2012 or subsequent years should be made using the legal meaning for "agent".
2011-042656
Guy Goulet
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