Income Tax Regulations

400 (1) In applying the definition taxable income earned in the year in a province in subsection 124(4) of the Act for a corporation’s taxation year

• (a) the prescribed rules referred to in that definition are the rules in this Part; and

• (b) the amount determined under those prescribed rules means the total of all amounts each of which is the taxable income of the corporation earned in the taxation year in a particular province as determined under this Part.

(1.1) In this Part, a corporation’s taxable income for a taxation year is equal to the total of

• (a) the corporation’s taxable income for the taxation year (determined without reference to this subsection) or the corporation’s taxable income earned in Canada for the taxation year, as the case may be, and

• (b) the positive or negative amount determined by the formula

  A – B

  where

  A

  is the total of all amounts that are, because of the application of section 33.1 of the Act, not required to be added in computing the corporation’s income for the taxation year, and

  B

  is the total of all amounts that are, because of the application of section 33.1 of the Act, not allowed to be deducted in computing the corporation’s income for the taxation year.

(2) For the purposes of this Part, permanent establishment in respect of a corporation means a fixed place of business of the corporation, including an office, a branch, a mine, an oil well, a farm, a timberland, a factory, a workshop or a warehouse, and

• (a) where the corporation does not have any fixed place of business it means the principal place in which the corporation’s business is conducted;

• (b) where a corporation carries on business through an employee or agent, established in a particular place, who has general authority to contract for his employer or principal or who has a stock of merchandise owned by his employer or principal from which he regularly fills orders which he receives, the corporation shall be deemed to have a permanent establishment in that place;

• (c) an insurance corporation is deemed to have a permanent establishment in each province and country in which the corporation is registered or licensed to do business;

• (d) where a corporation, otherwise having a permanent establishment in Canada, owns land in a province, such land shall be deemed to be a permanent establishment;

• (e) where a corporation uses substantial machinery or equipment in a particular place at any time in a taxation year it shall be deemed to have a permanent establishment in that place;

• (e.1) if, but for this paragraph, a corporation would not have a permanent establishment, the corporation is deemed to have a permanent establishment at the place designated in its incorporating documents or bylaws as its head office or registered office;

• (f) the fact that a corporation has business dealings through a commission agent, broker or other independent agent or maintains an office solely for the purchase of merchandise shall not of itself be held to mean that the corporation has a permanent establishment; and

• (g) the fact that a corporation has a subsidiary controlled corporation in a place or a subsidiary controlled corporation engaged in trade or business in a place shall not of itself be held to mean that the corporation is operating a permanent establishment in that place.