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) For the purposes of subsection (1), the expression “permanent establishment” has:

• (a) if the expression is given a particular meaning in a tax treaty with a country, the meaning assigned by that tax treaty with respect to a business carried on in that country; and

• (b) in any other case, the meaning that would be assigned by subsection 400(2) if that subsection were read without reference to its paragraph (e.1).