Is a non-resident corporation that operates an airline that normally flies to and from Canada qualify as an “eligible entity” notwithstanding that a part or all of its income may not be included in computing its income for a taxation year by the operation of an applicable Income Tax Convention between Canada and s. 81(1)(a)? CRA responded:
[A] careful review of other paragraphs under the definition of “eligible entity” and of the overall context and purpose of the provision shows that the exclusion in paragraph (a) was meant to exclude, generally, corporations described under subsection 149(1) while providing under paragraph (d) of that definition that five types of persons that are exempt under subsection 149(1) can qualify as an “eligible entity”.
In our view, a non-resident corporation that operates an airline, a portion of whose Canadian source income is not included in the computation of its income under Part I of the Act as a result of the operation of paragraph 81(1)(a) and a provision under an income tax convention between Canada and another State is not a corporation“ exempt from tax under Part I” under the definition of “eligible entity” in subsection 125.7(1) and therefore would not be prevented from being an “eligible entity” on that basis.