Meaning of ‘Permanent Establishment’ in Article 5 of Double Tax Conventions

New Zealand Journal of Taxation Law and Policy, Vol. 16, No. 1, March 2010

Journal of International Taxation, Vol 22, No. 4, April 2011

9 Pages Posted: 16 Jun 2010 Last revised: 18 Apr 2011

See all articles by Craig Elliffe

Craig Elliffe

University of Auckland - Faculty of Law

Date Written: November 19, 2009

Abstract

The Knights of Columbus case and its companion case American Income Life Insurance Company v Canada were decisions by Miller J in the Tax Court of Canada concerning the taxation of the Canadian insurance operations of the American entities.

The operations of the Knights in Canada were quite substantial involving approximately 250 people working as either field agents, general agents or in other more senior roles. Revenue Canada had taken the view that a permanent establishment existed in Canada. Consequently they asserted that business profits attributable to that permanent establishment should be subject to Canadian tax. This was upon the basis that either the use of the agents' homes constituted a fixed place of business, or alternatively, because a permanent establishment was deemed to exist because business was conducted through non-independent agents who had the authority to conclude contracts in the name of the Knights.

In a very well reasoned judgment Miller J concluded the Knights did not have a permanent establishment in Canada. This was because neither the field agents, nor the general agents, had the requisite authority to conclude contracts on behalf of the Knights. Additionally, the Knights did not have a fixed place of business in Canada in that they did not carry on their business through the homes of the field agents. This was due to the fact that they had no right of disposition over these premises. Expert evidence was given as to the inference arising from the selective use of clauses in Canada's treaty network.

Keywords: permanent establishment, Knights of Columbus, agency, fixed place of business, right of disposition

JEL Classification: K34

Suggested Citation

Elliffe, Craig Macfarlane, Meaning of ‘Permanent Establishment’ in Article 5 of Double Tax Conventions (November 19, 2009). New Zealand Journal of Taxation Law and Policy, Vol. 16, No. 1, March 2010 , Journal of International Taxation, Vol 22, No. 4, April 2011, Available at SSRN: https://ssrn.com/abstract=1625603

Craig Macfarlane Elliffe (Contact Author)

University of Auckland - Faculty of Law ( email )

Private Bag 92019
Auckland Mail Centre
Auckland, 1142
New Zealand

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