Words and Phrases - "month"
21 November 2023 Internal T.I. 2021-0880101I7 - Article 5(3)(b) of the Canada-Mexico Treaty
Art. 5(3)(b) of the Mexico-Canada Convention provides that a “permanent establishment” includes:
(b) the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only if activities of that nature continue (for the same or a connected project) within a Contracting State for a period or periods aggregating more than six months within any twelve month period
Regarding how “six months” should be computed, the Directorate first noted that, as this was an undefined term, it was to be determined in accordance with “Canadian domestic tax law,” and then stated:
Considering that the testing period of six months is not required to be consecutive, the only reasonable interpretation of the term “periods aggregating more than” six months within any twelve month period” is to aggregate the number of days equivalent to the number of months.
This interpretation was supported by Art. 5(3)(b) of the 2001 UN Model Convention, on which Art. 5(3)(b) of the Canada-Mexico Treaty was based, in 2011 having replaced the previous “six months” test by a “183 days” test, and by Kayelle.
In summary, for the purpose of Article 5(3)(b) … the term “six months” generally means the aggregation of the number of days in six months … [being] 183 days … .
23 November 2023 Internal T.I. 2020-0850381I7 - Article V(4) of the Canada-U.S. Treaty
Art. V(4) of the Canada-U.S. Treaty provides that a permanent establishment exists in a Contracting State if the use of an installation or drilling rig or ship in that State to explore for or exploit natural resources is for more than three months in any twelve-month period. The Directorate stated:
[T]he three-month testing period could be non-consecutive, such that each use of an installation or drilling rig or ship would be aggregated in determining whether the three-month threshold is exceeded.
Regarding whether “three months” in Art. V(4) means three calendar months or days totaling an equivalent of three months, the Directorate distinguished the findings in Smith (96 DTC 3246) and McCombie (2000 DTC 3636) as to the meaning of “month,” and stated:
Considering that the testing period of three months is not required to be consecutive, the term “three months” should be considered to refer to the aggregate time measured by the number of months. Accordingly … “three months” generally means the aggregation of the number of days in three months.
Regarding whether “use” in Art. V(4) of the Canada-U.S. Treaty includes preparation time, it stated:
During preparation time, the installation or drilling rig or ship in question is in the process of getting ready to operate and is not yet capable of being utilized to explore for or exploit natural resources. Thus, preparation time generally would not be counted towards the three month testing period. …
Regarding standby time, i.e., “generally a temporary pause from operation that could be caused, for example, by severe weather, or shortage of labour,” it stated:
Such temporary interruption should not change the status that the installation or drilling rig or ship in question is being utilized in the business.
MNR v. Kayelle Management (Yukon) Inc., 94 DTC 6116, [1994] 1 CTC 271 (FCA)
The taxpayer, which was a Canadian-controlled private corporation, had a fiscal year-end of February 1, 1990. It was not required to pay the final instalment of its tax owing for that year until May 31, 1990 because this was the end of the third complete calendar month following its year-end). In finding that the due date instead was May 1, 1990, Décary J.A. noted that: because "year" did not refer to a calendar year, "month" should not be restricted to a calendar month; the taxpayer's interpretation had the effect of having the "following" period start 28 days after the end of its fiscal year; and "one can fairly assume that Parliament had intended the delay prescribed for the payment of the remainder of taxes be the same for all corporations" Ss.28 and 35(1) of the Interpretation Act did not apply because there was a contrary intention as referred to in subsection 3(1) of the Interpretation Act.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Statutory Interpretation - Interpretation Act - Section 28 | 46 |