The taxpayer, a Canadian property insurer insures risk inside and outside Canada, but has no permanent establishment (“PE”) outside Canada. Although it included its “out of Canada net premiums” (“OCNP”) in income, it has not made any allocation under Reg. 403(4) as in its view this effectively allocated the OCNP to the provinces in proportion to the net premiums written in the provinces, which it considered to be a reasonable allocation method.
The Directorate stated: