Income Tax Regulations — 402
pment of merchandise be made by the corporation to another person and the customer’s office with which the sale was negotiated is located in a country other than Canada, (b) the corporation has a permanent establishment in the other country, and (c) the corporation is not subject to taxation on its income under the laws of the other country, or its gross revenue derived from the sale is not included in computing the income or profit or other base for income or profits taxation by the other country, because of (i) the provisions of any taxing statute of the other country, or (ii) the operation of any tax treaty or convention between Canada and the other country, the following rules apply: (d) with respect to the gross revenue derived from the sale, (i) paragraphs (4)(a) and (d) do not apply, (ii) that portion of paragraph (4)(c) preceding subparagraph (i) thereof shall be read as follows: “(c) where the destination of a shipment of merchandise to a customer to whom the merchandise is sold is in a country other than Canada,” and (iii) that portion of paragraph (4)(f) preceding subparagraph (i) thereof shall be read as follows: “(f) where a customer to whom the merchandise is sold instructs that shipment be made to some other person and the customer’s office with which the sale was negotiated is located in a country other than Canada,”; and (e) for the purposes of subparagraph (3)(a)(ii), paragraph (3)(b) and subparagraphs (4)(c)(ii) and (f)(ii), salaries and wages paid in the year to employees of any permanent establishment of the corporation located in that other country” shall be deemed to be nil. (5) For the purposes of subsection (3), “gross revenue” does not include interest on bonds, debentures or mortgages, dividends on shares of capital stock, or rentals or royalties from property that is not used in connection with the principal business operations of the corporation. (6) For the purposes of subsection (3), where part of the corporation’s operations were conducted in partnership with one or more other persons (a) the corporation’s gross revenue for the year, and (b) the salaries and wages paid in the year by the corporation, shall include, in respect of those operations, only that proportion of (c) the total gross revenue of the partnership for its fiscal period ending in or coinciding with the year, and (d) the total salaries and wages paid by the partnership in its fiscal period ending in or coinciding with the year, respectively, that (e) the corporation’s share of the income or loss of the partnership for the fiscal period ending in or coinciding with the year, is of (f) the total income or loss of the partnership for the fiscal period ending in or coinciding with the year. (7) Where a corporation pays a fee to another person under an agreement pursuant to which that other person or employees of that other person perform services for the corporation that would normally be performed by employees of the corporation, the fee so paid shall be deemed to be salary paid in the year by the corporation and that part of the fee that may reasonably be regarded as payment in respect of services rendered at a particular permanent establishment of the corporation shall be deemed to be salary paid to an employee of that permanent establishment. (8) For the purposes of subsection (7), a fee does not include a commission paid to a person who is not an employee of the corporation. [NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] SOR/80-949, s. 1; SOR/94-327, s. 1; SOR/94-686, ss. 78(F), 79(F), 81(F); SOR/2010-93, s. 9(F); SOR/2011-195, s. 1(F)