Canco licensed software of a US affiliate (USco), which it used to provide data analytics services to its Canadian customers. The software and Canadian customer data were kept on Canadian servers. USco personnel, physically situate at all times in the US, accessed the servers in order to maintain and (as required) upgrade the software and provide related quality-control services. Could part of the services rendered by USco be considered “services rendered in Canada” for purposes of Reg. 105?
CRA noted that although the server was being used in Canada to store information, CRA characterized the support services of USco as being accessory to the main supply of the software provided to Canco: USco was providing support services through telecommunications, computer, telephone, and software updates.
On this basis, it appeared that the office support services of the USco employees would be rendered in the United States and delivered, through a communications system such as a computer or telephone, to Canco and its employees, so that such aspect of the payment would be viewed as being in respect of the services rendered.