Income Tax Regulations — 2603
2603 (1) Where, in a taxation year, an individual had a permanent establishment in a particular province or a country other than Canada and had no permanent establishment outside that province or country, the whole of his income from carrying on business for the year shall be deemed to have been earned therein. (2) Where, in a taxation year, an individual had no permanent establishment in a particular province or country other than Canada, no part of his income for the year from carrying on business shall be deemed to have been earned therein. (3) Except as otherwise provided, where, in a taxation year, an individual had a permanent establishment in a particular province or in a particular country other than Canada and had a permanent establishment outside that particular province or particular country, the amount of the individual’s income for the taxation year from carrying on business that is deemed to have been earned in the particular province or particular country is half of the total of (a) that proportion of the individual’s income for the year from carrying on business that the gross revenue for the fiscal period that ends in the taxation year that is reasonably attributable to the permanent establishment in the particular province or particular country is of the individual’s total gross revenue for that period from the business; and (b) that proportion of the individual’s income for the taxation year from carrying on business that the total of all amounts that are salaries and wages paid in the fiscal period that ends in the taxation year to employees of the permanent establishment in the particular province or particular country is of the total of all amounts that are salaries and wages paid in that period to employees of the business. (4) For the purpose of determining the gross revenue for the year reasonably attributable to the permanent establishment in a particular province or country other than Canada within the meaning of paragraph (3)(a), the following rules shall apply: (a) where the destination of a shipment of merchandise to a customer to whom the merchandise is sold is in the particular province or country, the gross revenue derived therefrom shall be attributable to the permanent establishment in the province or country; (b) except as provided in paragraph (c), where the destination of a shipment of merchandise to a customer to whom the merchandise is sold is in a province or country other than Canada in which the taxpayer has no permanent establishment, if the person negotiating the sale may reasonably be regarded as being attached to the permanent establishment in the particular province or country, the gross revenue derived therefrom shall be attributable to that permanent establishment; (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 in which the taxpayer has no permanent establishment, (i) if the merchandise was produced or manufactured, or produced and manufactured, entirely in the particular province by the taxpayer, the gross revenue derived therefrom shall be attributable to the permanent establishment in the province, or (ii) if the merchandise was produced or manufactured, or produced and manufactured, partly in the particular province and partly in another place by the taxpayer, the gross revenue derived therefrom attributable to the permanent establishment in the province shall be that proportion thereof that the salaries and wages paid in the year to employees of the permanent establishment in the province where the merchandise was partly produced or manufactured (or partly produced and manufactured) is of the aggregate of the salaries and wages paid in the year to employees of the permanent establishments where the merchandise was produced or manufactured (or produced and manufactured); (d) where a customer to whom merchandise is sold instructs that shipment be made to some other person and the customer