Income Tax Regulations

5906 (1) For the purposes of this Part, where a foreign affiliate of a corporation resident in Canada carries on an active business, it shall be deemed to carry on that business

• (a) in a country other than Canada only to the extent that such business is carried on through a permanent establishment situated therein; and

• (b) in Canada only to the extent that its income therefrom is subject to tax under Part I of the Act.

(2) Where the Government of Canada has concluded an agreement or convention with the government of another country for the avoidance of double taxation that has the force of law in Canada and in which the expression “permanent establishment” is given a particular meaning, for the purposes of subsection (1), that expression has that meaning with respect to a business carried on in that country and, in any other case, has the meaning assigned by subsection 400(2).