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ARTICLE · 04 FEBRUARY 2009

New Jurisprudence On Permanent Establishment

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On May 16, 2008, the Tax Court of Canada released two important decisions dealing with the concept of permanent establishment ("PE") under treaty law: American Income Life Insurance Co. v. R., 2008 D.T.C. 3631 and Knights of Columbus v. R., 2008 D.T.C. 3648.

CanadaTax
Mathieu Champagne
Mathieu Champagne
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On May 16, 2008, the Tax Court of Canada released two important decisions dealing with the concept of permanent establishment ("PE") under treaty law: American Income Life Insurance Co. v. R., 2008 D.T.C. 3631 and Knights of Columbus v. R., 2008 D.T.C. 3648. In both cases, the Canada Revenue Agency ("CRA") had assessed insurance companies based in the US on the basis that the companies (1) had a fixed place of business in Canada and (2) were using dependent agents in Canada pursuant to paragraphs V(1), (5) and (7) of the Canada-US tax treaty.

Facts

American Income Life Co. ("AIL") and Knight of Columbus ("KC") are both insurance companies headquartered in the US. Both AIL and KC conducted business in Canada through a sophisticated network of agents. Their business was legally structured in a way that the agents could be viewed as independent contractors (as opposed to employees). The underwriting process was performed in the US and the agents had no authority

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