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: Is there a discrepancy between the CRA's position that subparagraph 9(b) of Article V of the Treaty could apply where services are rendered between related parties and the US Joint Committee on Taxation's statement in their report entitled "Explanation of the proposed Protocol to the Income Tax Treaty Between the United States and Canada" (JCX-57-08) dated July 8, 2009
Position: No.
Reasons: See below.
2009 IFA Conference: Canada-US Protocol Question 4
Is there a discrepancy between the CRA's position that subparagraph 9(b) of Article V of the Treaty could apply where services are rendered between related parties and the US Joint Committee on Taxation's statement in their report entitled "Explanation of the proposed Protocol to the Income Tax Treaty Between the United States and Canada" (JCX-57-08) dated July 8, 2009? In their explanation, the Joint Committee summarized a statement in the TE as follows:
"paragraph 9 only applies to services provided by the enterprise to third parties and not to services provided to that enterprise (i.e. inter-company services)."
CRA Response
The CRA continues to be of the view that a related party may be a "third party" and therefore paragraph 9 of Article V can give rise to a permanent establishment where the services in question are rendered to a related party. The CRA agrees with the comment in the TE to the effect that paragraph 9 of Article V cannot give rise to a PE for an enterprise when services are rendered to that enterprise. It is not clear to the CRA that its views are contrary to the views of the U.S. Joint Committee.
August 5, 2009
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