28 September 1993 Income Tax Severed Letter 931361 - Partnership—Canada-Egypt Tax Treaty

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

                                           931361
XXXXXXXXXX                                 K. B. Harding
                                           (613) 957-2111

September 28, 1993

Dear Madam:

Re: Canada-Egypt Income Tax Convention (the "Convention")

This is in response to your fax (the "Fax") dated September 22, 1993 concerning the treatment of the income of Canadian partners who are members of an Egyptian partnership which carries on business in Egypt and not in Canada.

Section 96 of the Canadian Income Tax Act (the "Act") provides that where a taxpayer is a member of a partnership, his income for a taxation year is computed in accordance with the rules set out therein. The income for a taxation year of a resident of Canada is his world income as computed in accordance with the section 3 of the Act which includes income from a business, whether active or inactive. Therefore, it is our view that section 96 of the Act has application in computing the income of a member of a foreign partnership who is a resident of Canada and applies to both income from a business and to investment income of a partnership.

As indicated in our letter of September 14, 1993 the Income Tax Conventions Interpretation Act ("ITCIA"), which was passed in Parliament and received Royal Assent, was enacted to ensure that the interpretation of any of Canada's tax treaties would not prevent Canada from taxing its residents on their world income. While it is generally the position that a tax treaty will override domestic tax law, the implementation of section 6.2 of the ITCIA, as explained in our previous letter, was clearly worded to override Canada's network of tax treaties. Accordingly, the ITCIA provides Canada with the right to tax its residents on their world income including any source of income earned by a partnership organized under either Canadian or foreign partnership law.

We are enclosing a copy of the ITCIA for your perusal.

Yours truly,

for Director Reorganizations and Foreign Division Rulings Directorate Legislative and Intergovernmental Affairs Branch