Administrative Policy
7 October 2020 APFF Roundtable Q. 12, 2020-0852241C6 F - CRA role in the interprovincial arbitration process
When asked to comment on the interprovincial arbitration process for resolving disputes (e.g., as to the presence of a provincial permanent establishment) between Canada (acting for the eight agreeing provinces), and Quebec and Alberta, respecting the allocation of taxable income of a corporation between the provinces, CRA noted that the Memorandum of Understanding to Avoid Corporate Double Taxation (the "Memorandum") signed by the CRA, Alberta and Quebec (the "Signatories") contemplated an arbitration process that went through four levels: (i) response to a proposal and any counter proposal; (ii) referral to the Signatories designated representatives for attempted resolution; (iii) referral to the Allocation Review Committee; and (iv) referral to the relevant Deputy Commissioner and Assistant Deputy Ministers.
The taxpayer can present its position during the first level of this Protocol. CRA also noted:
Where an agreement is reached in the arbitration process to resolve a dispute between the CRA and one or more of the signatory provinces to the Memorandum (Alberta and/or Quebec), the relevant province or territory represented by the CRA must comply with that agreement.
Whether or not an agreement is reached in the arbitration process to resolve a dispute with respect to the Allocation of Taxable Income for a corporation, the taxpayer concerned may still exercise the taxpayer’s right of appeal under the applicable legislation with respect to any assessments issued.
Subsection 400(1)
Cases
MNR v. Spruce Falls Power and Power Co., 53 DTC 1214, [1953] CTC 325 (SCC)
The "rule is this: that when a tax is imposed on a segment of business whose total operations extend beyond the taxing jurisdiction, the income from the whole of the operations is to be treated as distributed over the range of processes which make up that whole. This furnishes a basis on which the taxation on the income attributable to the portion carried on, say, in a province, can be determined: it may be a distribution of the income in relation to the cost of each such process or by means of any other formula that will fairly reflect the share in the end result which it contributes."
Administrative Policy
8 June 2018 Internal T.I. 2018-0744881I7 - Regulation 403 – allocation of income
Under Regs. 403(1) and (3), a property insurer (or, in this case, a reinsurer) is required to allocate its taxable income to the provinces on the basis of the respective proportions of its net property insurance premiums that are arrived at by allocating its net premiums to the provinces where the insured property is situate – except that if it does not have a permanent establishment in a particular province, the net premiums for the insured property in that province are allocated to the province which has a PE to which those net premiums are “reasonably attributable.”
CRA indicated that, even in this specialized context, it considers that a limited or general partner has a PE wherever the partnership has a PE, so that the reinsurer in question was considered for Reg. 403 purposes to have a PE in various provinces by virtue of being a partner - even though the partnership in question did not carry on any insurance business.
It stated:
Paragraph 400(2)(c) does not indicate that it is an exclusive (“notwithstanding”) or exhaustive (“means”) provision such that it would prevent consideration of any situation other than as described in this paragraph that would cause the taxpayer to otherwise have a PE, such as where a taxpayer as a partner has a PE in a province due to the partnership’s PE.
Locations of other summaries | Wordcount | |
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Tax Topics - Income Tax Regulations - Regulation 403 - Subsection 403(3) | PE for 403(3) purposes includes any PE of any partnership of which insurer is member | 224 |
Subsection 400(2)
Cases
Inwest Investments Ltd. v. The Queen, 2015 BCSC 1375
The high rate of B.C. corporate income tax was avoided through rolling shares into a Yukon corporation (“Wesbild”), which purported not to have a B.C. permanent establishment, before a sale of the shares closed (giving rise to a $336M capital gain). Wesbild’s position was that, applying Marconi, it was not carrying on business, so that under Reg. 400(2) it did not have a fixed place of “business” (and, thus, no permanent establishment) in B.C. CRA reassessed (but not until after the normal reassessment period) on the basis that, in the context of Reg. 400 et seq., “business” included having property or taxable capital gains as the only sources of income.
After finding that the filing position of Wesbild was reasonable and, therefore, not a “misrepresentation,” Fitzpatrick J stated (at para. 181):
Wesbild’s filing position conformed to the Marconi test… . There is no indication that the CRA’s currently-advanced dictionary definition of “business” had any support at all in 2001/2002 or even at this time.
Locations of other summaries | Wordcount | |
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Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) | reasonable filing position cannot be a “misrepresentation” | 551 |
Tax Topics - General Concepts - Solicitor-Client Privilege | not necessary to provide legal opinion to rely on having consulted legal counsel | 225 |
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Business | Marconi test of "business" applied outside source-of-income context | 154 |
Tax Topics - Statutory Interpretation - French and English Version | "misrepresentation" informed by narrower French version | 109 |
Sunbeam Corporation (Canada) Ltd. v. MNR, 62 DTC 1390, [1962] CTC 657 (SCC)
The taxpayer, which sold its manufactured electrical appliances to wholesalers throughout the country, was found not to have a permanent establishment in Quebec by virtue of having a sales representative there who maintained an office in his own home for doing paperwork and making occasional sales demonstrations. The premises of the sales representative did not constitute a fixed place of business of the taxpayer. The use by the sales representative of the taxpayer's products for sales demonstrations did not constitute a "use" of the kind contemplated by Regulation 400(2)(e) and, in any event, that provision "was intended only to apply to machinery and equipments such as is used by contractors or builders in the course of their operations".
MNR v. Panther Oil & Grease Manufacturing Co. of Canada Ltd., 61 DTC 1222, [1961] CTC 363 (Ex Ct)
The taxpayer, whose factory in Ontario filled orders for roofing materials and lubricants generated by its sales force in various provinces, including Quebec, was found to have a "branch" in Quebec (notwithstanding that its large sales force there used their own homes) because "it had a component portion of its sales organization there" (p. 1230), and also had an "agency" in Quebec because its Quebec division manager and district managers "were its instrumentalities for the conduct of its sales in Quebec" (p. 1230). Accordingly, it had a permanent establishment in Quebec under Regulation 411(1)(a) which stated that "a 'permanent establishment' includes branches ... offices, agencies and other fixed places of business".
With respect to what now is Regulation 400(2)(b), the facts were not sufficient to show that the individuals had a "general authority to contract" given that approximately 15% of the orders had to be sent to a sales office in Texas for credit approval, and that the Quebec division and district managers only had indirect authority to hire and fire salesmen. However, the fact that some of the individuals kept a small stock of merchandise on hand from which they regularly filled small orders, satisfied the second branch of Regulation 400(2)(b).
See Also
Martorelli v. The Queen, 2010 DTC 1156 [at 3313], 2010 TCC 216 (Informal Procedure)
The taxpayer worked throughout the year at a construction site 50 kilometers away from his home, for which his employer gave him a transportation allowance of $8,467. In determining whether s. 8(1)(h.1) operated so as to exclude the allowance from the taxpayer's income, Woods J. considered whether the employer's presence on the construction site was in the nature of a "permanent establishment." She stated (at para. 21): "No evidence was led as to whether this test was satisfied, such as whether the employer had a field office at the construction site."
Locations of other summaries | Wordcount | |
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Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(h.1) | 196 |
Toronto Blue Jays Baseball Club v. Minister of Finance (Ontario), 2005 DTC 5360 (Ont. CA)
The respondents, which owned and operated professional baseball, hockey and basketball teams were found not to have permanent establishments outside Ontario in respect of the locker rooms and coaches rooms occupied by them while playing in venues outside Ontario. McMurtry C.J.O. stated (at p. 5364) that the "teams' connection with non-Ontario venues and the control of these venues is relatively so transitory that they cannot be considered to be fixed places of business". Furthermore, the equipment transported by the teams to the non-Ontario playing venues was not substantial enough to qualify as "substantial machinery or equipment" under clause (e) of the definition of "permanent establishment".
Locations of other summaries | Wordcount | |
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Tax Topics - Other Legislation/Constitution - Ontario - Employer Health Tax Act - Subsection 1(2) - Permanent Establishment | locker and coach's room used in away games were not a PE | 108 |
Ivy Real Estate Corp. S.A. v. Deputy Minister of Revenue of Québec, [1989] 2 CTC 39 (Que. C.A.)
The taxpayer, which was a Panamanian company, owned a commercial rental building in Montréal which a real estate management company ("Edgecombe") spent approximately one day a month managing in return for a fee equal to 3% of gross rentals. The taxpayer was found to have an "establishment" in Québec because it was carrying on business at the building through its agent.
Chicago Blower (Canada) Ltd. v. MNR, 66 DTC 471 (TAB)
Local sales agencies of the taxpayer situate in Toronto and Montreal represented permanent establishments in Ontario and Quebec on the basis of a general authority to contract, given that the agents there could make contracts on behalf of the taxpayer, arrange terms of payment, and grant credit without reference to the head office in Winnipeg.
Although the offices kept on hand stock-in-trade of the smaller and more frequently ordered items, it was not possible given the bulky nature of much of the merchandise sold by the taxpayer for the offices to keep on hand a supply thereof from which orders could be filled regularly.
Enterprise Foundry (N.B.) Ltd. v. MNR, 64 DTC 660 (TAB)
The business of the taxpayer ("N.B.") comprised the selling of stoves in Quebec that were manufactured by an affiliated company whose manufacturing facilities were in New Brunswick. N.B.'s key employee ("Dukelow") resided in Montreal, was in charge of N.B. stock that was kept in a Montreal warehouse owned by an independent warehouse company, attended twice daily at the warehouse in order to handle various matters including approving the orders of other salesmen for shipment, and appeared to all and sundry as the taxpayer's Montreal agent. In finding that the taxpayer had a permanent establishment in Quebec under the predecessor of what now is Regulation 400(2)(b), Mr. Weldon stated (p. 665), that the taxpayer carried on business in Quebec:
"through an employee, Ralph Dukelow, who not only had general authority (which obviously did not need to include power to quote special prices) to make contracts for N.B. but who had a stock of merchandise owned by N.B. (the stock in [the] Montreal warehouse was under Mr. Dukelow's control) from which he regularly filled the various substantial orders which he received."
In addition, "it would be reasonable to treat the Montreal warehouse as that of the taxpayer in a broad sense thereby bringing it within Regulation [400(2)]" (p. 666).
Speaking more generally, he stated at (p. 669) that the taxpayer had a permanent establishment in Quebec because there was an affirmative answer to the following question:
"Is there a definite sales organization large or small in that province, set up on a permanent or stable basis, which is clothed with authority to transact business, complete sales contracts, and arrange shipment of the products covered thereunder?"
Locations of other summaries | Wordcount | |
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Tax Topics - Income Tax Regulations - Regulation 402 - Subsection 402(8) | 115 |
Ronson Art Metal Works (Canada) Ltd. v. MNR, 56 DTC 440 (ITAB)
The taxpayer, which employed in Quebec a full-time sales representative who had no stock on hand, who contacted clients and prepared orders and reports to be sent to the Toronto head office from his Montreal home, and who had no general authority to contract in that although he could take orders from existing customers he could not open new accounts, was found to not thereby have a permanent establishment in Quebec. The subsequent use of leased premises by the taxpayer in Montreal for the repair of cigarette lighters only resulted in the allocation to Quebec of income from the repair services, and not other sales revenues, notwithstanding that the sales representative used an office in the premises to perform the clerical part of his work (if he so desired) and to occasionally meet with a client.
Administrative Policy
20 February 2014 External T.I. 2012-0460191E5 - Permanent establishment in a province
In the course of making general comments on the meaning of permanent establishment, CRA quoted from 2011-0395331I7, including the following:
In …Dudney [2000] 2 CTC 56, a "fixed place of business" for the purpose of Article XIV of the Canada-U.S. Income Tax Convention was described as an identifiable location with a certain degree of permanence in which the business of the enterprise is being carried on. Accordingly, such regularity and permanence would suggest that a fixed place of business is stable and not of a temporary or tentative nature. The scope of activities, regularity and length of time during which a premises is used are all significant factors in determining whether there is a fixed place of business; however, it has been our longstanding view that the activities carried on by the employees must also be such that it would be essential that the corporation has a contractual or implied right to the use of space at each customer location in order for it to carry out those activities (see 9638900).
9 May 2013 External T.I. 2012-0435401E5 F - Server as a PE in a province
A Canadian-resident corporation which provided it services through internet sites hosted on servers owned by it and situated in Quebec would have its income provincially allocated on the basis that such servers were Quebec fixed places of business. Before so concluding, CRA stated (TaxInterpretations translation):
The existence of a fixed place of business implies that an installation or tangible property, such as a server, is used in the course of the carrying on of the corporation’s business. A website alone does not meet this criterion since it is an intangible asset. It is not further required that the corporation be the owner of a server for it to be a fixed place of business. It will suffice that the server be at its disposal. That factual determination for instance could be made based on a contract for the leasing of a server. The place of business must also be considered fixed, which requires a certain degree of permanence. Finally, there must be a link between the carrying on of the business and the place of business.
In a case where a corporation carries on a business solely through permanent establishments in Quebec, including servers that it owns, it appears to us that all of the "taxable income earned in the year in a province” as that term is defined in subsection 124(4), would be attributable to the province of Quebec.
29 November 2011 November CTF Roundtable, 2011-0426561C6 - Public Warehouse: PIA
The questioner noted that:
CRA has in [the context of Reg. 400(2)(b)] ascribed an ordinary meaning to the word "agent", [as] 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 response, CRA noted the statement in Canada v. Merchant Law Group, 2010 FCA 206 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," and then stated:
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.
20 July 2011 Internal T.I. 2011-0395341I7
a corporation which acted predominantly as a staffing agency did not have a permanent establishment at the client premises where it placed staff. CRA stated:
It is our view that a placement agency can be distinguished from other service companies because the place where a personnel agency carries on its business may not include the place where its employees are assigned to perform employment duties. Case law...including Betteridge...Fonta...and Dunbar...supports the notion that business may not be carried on in a place simply by virtue that personnel have been placed there. However, if a placement agency provides specialized labour, it could be viewed that the corporation has entered the realm of being a contractor or subcontractor providing specialized services through an identifiable employee or employees.
1 March 2010 Internal T.I. 2009-0346951I7 F - Article XVI-Établissement stable-Province
A U.S.-incorporated resident of the U.S. for Treaty purposes (“Non-Resident Corporation”), whose shares were 50% owned by a non-resident artist whom it represented, presented various shows in Canadian provinces, and received a share of the revenues from the promoter. For each show, it (through its employees) had to install the stage, lights, sound system, etc. on the day of the show, and used a number of trailer trucks to transport the stage equipment.
Before considering Reg. 400(2)(e), the Directorate found that “Article XVI of the Convention, which applies without regard to, inter alia, Article VII of the Convention, and which permits Canada to tax income derived by a non-resident company from performances in Canada without requiring that such income be earned through a permanent establishment in Canada under the Convention.”
Locations of other summaries | Wordcount | |
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Tax Topics - Income Tax Regulations - Regulation 400 - Subsection 400(2) - Paragraph 400(2)(e) | using massive stage equipment for Canadian concerts did not result in deemed PEs given that at each venue under 30 days and in Canada under 90 days | 240 |
Tax Topics - Treaties - Income Tax Conventions - Article 16 | Art. XVI of US Convention applicable irrespective of whether a PE | 157 |
18 December 2003 External T.I. 2003-0021195 F - Etablissement Stable en Ontario
Regarding whether an office that a Quebec company (Canco) opened in Ontario which Ontario sales employees would use on occasion for meetings and calls but with no merchandise for sale being kept there and with most decisions made at the Quebec headquarters was an Ontario permanent establishment under the preamble to Reg. 400(2), CCRA stated:
[A] fixed place of business must meet the criteria of stability and carrying on of a business established in the jurisprudence ... . Consequently, an office will only constitute a fixed place of business for a corporation if it satisfies both of these tests. While the first of these tests is generally not problematic in the case of an office, the second requires an examination of the operations and activities of the corporation that are carried on at that location. In this regard, a certain degree of activity and regularity will be required to carry on a business at a specific location (see Corporation A.A.A. S.A. v. M.N.R., supra, at 1799-1800). Thus, a location where only incidental functions related to the corporation's business are performed will not constitute a fixed place of business of the corporation. …
In this case, the facts submitted are clearly insufficient to allow us to conclude whether or not the XXXXXXXXXX office constitutes a fixed place of business for Canco.
Locations of other summaries | Wordcount | |
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Tax Topics - Income Tax Regulations - Regulation 400 - Subsection 400(2) - Paragraph 400(2)(b) | Ontario sales office was not a deemed PE since general authority to contract was at the Quebec administrative office | 367 |
17 January 1994 Internal T.I. 9328927 F - Indian - Employment Income
Discussion of factors for determining the location of the permanent establishment of a business carried on by a self-employed Indian.
Locations of other summaries | Wordcount | |
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Tax Topics - Other Legislation/Constitution - Federal - Indian Act - Section 87 | 59 |
13 January 1993 T.I. (Tax Window, No. 28, p. 13, ¶2381)
A Canadian corporation whose only business is leasing equipment to franchisees in various provinces and that has no employees in such provinces would not be considered to have a permanent establishment in any of those provinces given that it would not be considered to be using the equipment itself.
81 C.R. - Q. 27
An oil well of a joint venture is a permanent establishment of the participant corporations.
I.T.-177R2 "Permanent establishment of a corporation in a province and of a foreign enterprise in Canada".
Articles
Tremblay, "Permanent Establishments in Canada", 1989 Conference Report, c. 38.
Locations of other summaries | Wordcount | |
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Tax Topics - Treaties - Income Tax Conventions - Article 5 | 0 |
Paragraph 400(2)(b)
Administrative Policy
7 October 2022 APFF Roundtable Q. 7, 2022-0942731C6 F - Permanent establishment and teleworking
Mr. X, who has been living in Quebec and commuting to the sole permanent establishment of his employer in Quebec, from which he receives his remuneration, has now agreed with his employer that he will telework at his cottage in Ontario for three days a week, and continue commuting to work at his employer's facility in Quebec two days a week. He has the authority to enter into contracts for his employer.
Regarding whether Reg. 400(2) would deem Mr. X's employer to have an Ontario permanent establishment at Mr. X’s cottage, CRA indicated that the “fact that an employee works from home is generally not sufficient to create a fixed place of business of the employer in the province,” and then stated, regarding Reg. 400(2)(b):
[T]he fact that an employee of a corporation can contract for the employer from the employee’s home should not be a factor that, in and of itself, creates a permanent establishment in a particular province. In other words, in order for the presumption in [Reg.] 400(2)(b) to apply, the employee must not only have general authority to contract for the employer, but the employer must also carryon business in the province through the employee established there. The issues of whether the employee is established in the province where the cottage is located and whether Mr. X's employer carries on business through him in that province are questions of fact that can only be resolved after a full examination of all the relevant facts, acts, circumstances and documents.
Locations of other summaries | Wordcount | |
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Tax Topics - Income Tax Regulations - Regulation 102 - Subsection 102(1) | Reg. 400(2)(b) PE is not necessarily an employer establishment to which the employee reports to work | 218 |
Tax Topics - Treaties - Income Tax Conventions - Article 5 | having an employee, with general authority to contract, telework from his cottage in another province does not necessarily create an employer PE there | 166 |
18 December 2003 External T.I. 2003-0021195 F - Etablissement Stable en Ontario
A Quebec company (Canco) opened an office in Ontario which Ontario sales employees would use on occasion for meetings and calls but with no merchandise for sale being kept there and with most decisions made at the Quebec headquarters. After noting that the office would not be a fixed place of business under the preamble to Reg. 400(2) if only incidental functions to the Canco business were carried on there, CCRA went on to indicate that Reg. 400(2)(b) did not appear to be satisfied, stating:
Under paragraph 400(2)(b) of the Regulations, a corporation is deemed to have a permanent establishment at the particular place of business of an employee of the corporation through whom it carries on business if either of the following two conditions are satisfied: the employee has general authority to enter into contracts for the corporation, or the employee has a stock of merchandise owned by the corporation from which the employee regularly fills orders received. Regarding the first condition, the courts have determined that it is not satisfied where the employee can accept orders from existing customers but cannot open new accounts (see Ronson Art Metal Works (Canada) Limited v. M.N.R., supra, and Chicago Blower (Canada) Limited v. M.N.R., 66 DTC 471 (T.A.B.)), or where orders must be approved by the corporation (see Canadian Thermos Products Limited v. M.N.R., 61 DTC 471 (T.A.B.)). M.N.R., 61 DTC 169 (T.A.B.), Sunbeam Corporation (Canada) Ltd. v. M.N.R., supra, and Chicago Blower (Canada) Limited v. M.N.R., supra). As for the second condition, it was decided in Canadian Thermos Products Limited v. M.N.R., supra, that the fact of an employee occasionally filling orders from an employer's stock of merchandise was insufficient. …
[A]ll decisions of a commercial nature (opening of accounts, special agreements, price lists, discounts, promotions, etc.) are made in Quebec and … employees located in Ontario do not have the general authority to contract on behalf of Canco. …[A]ll merchandise and promotions for Canco's customers are shipped from Canco's main warehouse in Quebec … .
Locations of other summaries | Wordcount | |
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Tax Topics - Income Tax Regulations - Regulation 400 - Subsection 400(2) | an office with only incidental functions will not constitute a fixed place of business | 233 |
Income Tax Technical News, No. 2, December 30, 1994
Even if a corporation carries on business in a province through a commission agent, broker or other independent agent, Regulation 400(2)(b) may deem the corporation to have a permanent establishment therein if the other conditions required for its operation are met.
Locations of other summaries | Wordcount | |
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Tax Topics - Other Legislation/Constitution - Federal - Indian Act - Section 87 | 10 | |
Tax Topics - Income Tax Act - Section 252 - Subsection 252(4) | 13 |
4 September 1990 Memorandum (Tax Window, Prelim. No. 1, p. 22, ¶1011)
Where a corporation keeps merchandise in a public warehouse on terms which require the warehouse to deliver possession of the merchandise at the direction of an independent agent, the agent "has" the merchandise for purposes of Regulation 400(2)(b).
Paragraph 400(2)(e)
Administrative Policy
12 June 2014 Ruling 133588r [30 continuous-days test for use of substantial equipment]
The Charity, which was incorporated in Participating Province X, was found not to have a permanent establishment in Participating Province Y, i.e., what, by virtue of s. 2(2) of the New Harmonized Value-added Tax System Regulations, No. 2, would be a permanent establishment under Part IV of the ITA Regs if Charity's activities were a business.
In commenting on Reg. 400(2), CRA stated:
…A fixed place of activities includes a determined or ascertained space in which there is some presence or routine over which the charity has some degree of control and in which some undertaking or operations of the charity occur. … It does not mean that the place of activities must exist for a long time or be located in a durable building; for instance, a temporary field office on a construction site could be a fixed place of activities.
…Generally, where a charity uses (rented or owned) substantial machinery or equipment in a province either for 30 continuous days or for 90 cumulative days in a 12-month period, the charity would meet [the] requirement [in Reg. 400(2)(e)].
Locations of other summaries | Wordcount | |
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Tax Topics - Excise Tax Act - Regulations - New Harmonized Value-Added Tax System Regulations, No. 2 - Subsection 2(2) | 30 continuous-days test for use of substantial equipment | 187 |
16 April 2010 Internal T.I. 2010-0362601I7 F - Établissement stable-Province
A non-resident corporation claimed a deduction under subsection 124(1) of the Income Tax Act (the "Act") for its XXXXXXXXXX taxation year. In addition, you informed us that the Equipment used by a non-resident corporation in connection with the performances by an artist were considered by the TSO to be of sufficient importance to constitute a permanent establishment for the purposes of Reg. 400(2)(e) at each of the venues where it mounted performances.
Initially, the Directorate considered that “the equipment or machinery must be used either for a period of more than 30 consecutive days per site or project or for a period of more than 90 consecutive days within a 12-month period for all projects,” so that the venues did not qualify as PEs. However, it subsequently determined that its policy was that if the taxpayer reported for federal and provincial purposes as having PEs on the basis of a shorter presence at the venues, it should be treated as being “deemed to have a permanent establishment for its XXXXXXXXXX taxation year in each province in which performances were mounted for the purposes of paragraph 400(2)(e) of the Regulations and the application of subsection 124(1) of the Act.”
1 March 2010 Internal T.I. 2009-0346951I7 F - Article XVI-Établissement stable-Province
A U.S.-incorporated resident of the U.S. for Treaty purposes (“Non-Resident Corporation”), whose shares were 50% owned by a non-resident artist whom it represented, presented various shows in Canadian provinces, and received a share of the revenues from the promoter. For each show, it (through its employees) had to install the stage, lights, sound system, etc. on the day of the show, and used an number of trailer trucks to transport the stage equipment. The tasks listed were performed by employees of Non-Resident Corporation.
After finding that Non-Resident Corporation did not have a fixed place of business at the various arenas where the shows were mounted, the Directorate then considered whether this result was altered by Reg. 400(2)(e), stating:
[I]n order to deem a permanent establishment in a province or jurisdiction for the purposes of paragraph 400(2)(e) …, generally the equipment or machinery must be used either for a period of more than 30 consecutive days per site or project or for a period of more than 90 cumulative days within a 12-month period for all projects. Since … the Non-Resident Corporation used the concert equipment in each of the provinces where performances were produced for a period of less than 30 consecutive days and throughout Canada for a period of less than 90 cumulative days, we are of the view that it is not deemed to have a permanent establishment in any of the provinces … .
Locations of other summaries | Wordcount | |
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Tax Topics - Income Tax Regulations - Regulation 400 - Subsection 400(2) | being on concert tour in Canada did not render the various arenas fixed places of business, given lack of “regularity and recurrence” | 140 |
Tax Topics - Treaties - Income Tax Conventions - Article 16 | Art. XVI of US Convention applicable irrespective of whether a PE | 157 |
21 November 2003 External T.I. 2003-0010195 F - Etablissement Stable
A corporation with its head office in the province of Quebec uses 10 sets of equipment, each of which includes a truck and equipment. Although mostly used in Quebec, an average of four of these sets are called upon to work primarily in two other provinces. A set is moved from one customer to another and its stay with a customer can last from one day to 3 weeks. In finding that such equipment likely gave rise to permanent establishments in those other provinces pursuant to Reg. 400(2)(e), CCRA stated:
[A] permanent establishment could be found to exist in a province where a corporation uses substantial equipment in that province at any time in its taxation year, even if the equipment in question is moved frequently from one place to another. Assuming that the equipment on a single truck would qualify as substantial in the circumstances, which we find entirely plausible in the circumstances, the condition in paragraph (e) would be satisfied if it were accepted that at some point in the corporation's taxation year (even if only for a day), the corporation used substantial machinery or equipment at a particular location.