Revenue Canada Taxation Head Office
XXXX
J. Shaw (613) 957-8983
December 16, 1988
Dear Sirs:
Re: Subparagraph 66(15)(c)(iv) of the Income Tax Act Subsection 400(2) of the Regulations to the Income Tax Act
In reply to your letter of November 9, 1988, we cannot state categorically that a property described in subparagraph 66(15)(c)(iv) of the Income tax Act could not be a permanent establishment for the purpose of subsection 400(2) of the Regulations thereto. It seems to us that whether having a rental or royalty interest would, by itself, mean that the holder had a permanent establishment would depend on the terms and legal effect of the agreement creating the rental or royalty. If the agreement gave the recipient of the rental or royalty a right, title or interest in the oil well, or if the recipient had an interest in substantial equipment used in Canada, the recipient would have a permanent establishment in Canada as a result of the arrangement.
If there is an actual situation which has prompted your concern, you may wish to discuss the matter with officials of the relevant District Office if the arrangement is in place. If the arrangement is not yet in place, we would be prepared to examine a request for an advance income tax ruling on the matter. Since the matter would involve the resolution of a question of fact, we cannot be certain that we could provide a ruling whether favourable or not, on the matter. However, if we could satisfy ourselves that the question of fact could be resolved, we would be prepared to issue a ruling.
Yours sincerely
for Director Bilingual Services and Resource Industries Division Rulings Directorate