1 May 2009 CLHIA Roundtable Q. 4, 2009-0316641C6 - CLHIA Round Table Question #4 - TIEAs -- summary under Subsection 5907(11)

In order for income from an active business carried on by a foreign affiliate to qualify as 'exempt earnings', the affiliate must be resident in a designated treaty country under common law and the active business must be carried on by it in a designated treaty country. Accordingly, if the central management and control of a foreign affiliate is in Country A (a non-treaty country) and it carries on business only in Country B (also a non-treaty country), it would be necessary for Canada to have a TIEA with both countries. Conversely, if the foreign affiliate was incorporated in Country A but not resident there under common law definitions, and was resident in Country B at common law and also carried its entire business on in Country B, it would only be necessary for a TIEA to be entered into with Country B.