Canco incorporated a wholly-owned subsidiary in Dubai, in the United Arab Emirates (Dubai Co), whose management and control, and the sole establishment of its business will be in Dubai. Art. 4(1)(b)(ii) of the Canada UAE Convention, defined a resident of the UAE to include a company incorporated there where “all or substantially all of the company’s income is derived by the company from the active conduct of a trade or business, other than an investment business, in the United Arab Emirates and all or substantially all of the value of the company’s property is attributable to property used in that trade or business.” CRA stated:
The terms "all or substantially all" and "active conduct of a trade or business" are not defined in the CAN-UAE Convention. As stated in Article 3(2) of the CAN-UAE Convention: “As regards the application of the Convention by a Contracting State at any time, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which the Convention applies.” In the light of the foregoing, expressions not defined for the purposes of the CAN-UAE Convention shall, unless the context otherwise requires, have the meaning which they have for the purposes of the Act.
The CRA's administrative position is that the "all or substantially all" test is usually considered to be satisfied where a level of 90% or more is reached. However, the "all or substantially all" test could, depending on the circumstances and context, be satisfied even if the 90% level is not strictly met.