When asked to comment on the interprovincial arbitration process for resolving disputes (e.g., as to the presence of a provincial permanent establishment) between Canada (acting for the eight agreeing provinces), and Quebec and Alberta, respecting the allocation of taxable income of a corporation between the provinces, CRA noted that the Memorandum of Understanding to Avoid Corporate Double Taxation (the "Memorandum") signed by the CRA, Alberta and Quebec (the "Signatories") contemplated an arbitration process that went through four levels: (i) response to a proposal and any counter proposal; (ii) referral to the Signatories designated representatives for attempted resolution; (iii) referral to the Allocation Review Committee; and (iv) referral to the relevant Deputy Commissioner and Assistant Deputy Ministers.
The taxpayer can present its position during the first level of this Protocol. CRA also noted:
Where an agreement is reached in the arbitration process to resolve a dispute between the CRA and one or more of the signatory provinces to the Memorandum (Alberta and/or Quebec), the relevant province or territory represented by the CRA must comply with that agreement.
Whether or not an agreement is reached in the arbitration process to resolve a dispute with respect to the Allocation of Taxable Income for a corporation, the taxpayer concerned may still exercise the taxpayer’s right of appeal under the applicable legislation with respect to any assessments issued.