An insurance corporation (that reinsures policies issued by another insurer) holds partnership interests in several partnerships that have no insurance business and have permanent establishments in other provinces, but are not involved in an insurance business. The CRA correspondent suggested that considering a partner to have a PE in any province in which the partnership has a PE, as described in TI E56239, would distort the allocation of taxable income; and that the income for those other provinces instead should be allocated under Reg. 403(3)(a). The Directorate responded:
[W]herever [a] partnership is carrying on business through a PE, each partner is carrying on business through that PE. This applies to both the general and the limited partners. Consequently … the taxpayer will have a PE in any province where the partnerships have a PE.
… [B]ased on the fact that the taxpayer derives income (premiums) from reinsuring property situated in a province where the taxpayer has a PE due to being a member of a partnership, subsection 403(1) of the Regulations will allocate the taxpayer’s taxable income on a proportional basis to that province. …
In view of the taxpayer having a PE in the province(s) where the partnerships have a PE, subsection 403(3) does not apply to the taxpayer with respect to those provinces.