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.
DATE: July 9, 1984
TO - ST. JOHN'S DISTRICT OFFICE J.P. Janes Chief of Audit
FROM- HEAD OFFICE Corporate Rulings Directorate D.A. Bresee 993-6201
ATTENTION Bob Byrne Business Audit
RE: XXXX
This is in reply to your undated memorandum concerning XXXX As you have indicated the Belgium resident corporations are taxable in Canada in respect of the profits derived from the operations of the above boats in Canadian waters by virtue of paragraph 3 of Article VIII of the Canada-Belgium Tax Treaty notwithstanding that the non-residents do not have a permanent establishment in Canada. In computing the above profits there would be included the mobilization and demobilization fees provided for under the above contracts as it is our view that (i) the mobilization and demobilization activity is integral to the service being provided and is not a saleable service in and of itself and (ii) the charging of these fees is just another way of computing the overall contract price. Recently, as you are aware, an agreement was entered into by the competent authorities of U.S. and Canada not to tax these fees if they were reasonable. However this agreement is only in respect of U.S. and Canadian residents and would not have application to this situation. In computing the above profit the non-resident should be allowed deductions for expenses incurred by it that relate to the operation of the boats during the mobilization and demobilization period to the extent they are reasonable.
Article XV of the Canada-Belgium Tax Treaty will apply to the salaries and wages paid to the Belgium/crew/aboard the two boats. There is nothing in the facts as presented which would lead us to conclude that the remuneration derived by the above Belgium residents is "borne directly by a permanent establishment or a fixed base which their Belgium employer has in Canada" as we understand that their employer has no permanent establishment or fixed base in Canada. Accordingly if the shore employees were not resident in Canada for a period or periods exceeding 183 days they would be exempt from Canadian tax in respect of the herein described remuneration.
We trust our reply is sufficient for your purposes.
Chief Mines, Oil & Forest Industries Section Specialty Corporations Rulings Division Corporate Rulings Directorate Legislation Branch
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