Treaty Calculation Allows Minister to Use any Twelve-Month Period

Triskelion Projects International Inc. v. The Queen 2022 TCC 63



The Appellant tried a clever argument for which no factual basis existed.  The appeal was therefore dismissed.

Decision & Analysis

This is a pithy decision dealing with the definition of ‘permanent establishment’ in the Canada/US tax treaty. The only real issue for the TCC to decide was whether the Appellant had a permanent establishment in Canada for the 2016 tax year.

The facts are simple.  Triskelion Projects International Inc. (“Appellant”) is a US corporation providing management services to the construction industry.  The Appellant provided these services in Canada from March 2015 to March 2016. A critical fact is that the Appellant provided 198 days of consulting services in Canada in 2015 and 54 days of consulting services in Canada in 2016.

The Canada/US tax treaty includes a provision that allows the source state (Canada in this instance) to tax income earned by a resident of the other state (US) if that income is earned by way of a permanent establishment.  Embedded in that definition is a deeming provision, which states that the source state may tax income earned by a resident of the other state from providing services in the source state if the resident of the other state provided 183 days or more of those services in the source state in any twelve-month period.

The question became, did the Appellant have a deemed services permanent establishment in Canada in 2016?

Crown’s Argument

The Crown argued that since the Minister can use any twelve-month period (as opposed to the calendar year), the Appellant was liable to tax in 2016.  This was so due to the Minister’s ability to use the number of days in 2015 where the Appellant provided its consulting services toward the calculation.  In other words, the Appellant had provided at least 183 days of consulting services in the twelve-month period between March 2015 and March 2016.

Appellant’s Argument

The Appellant argued that the Minister was not permitted to use the 2015 days in its calculation, since it had used 183 of the 198 2015 days toward the 2015 assessment.  The Appellant basically argued that the Minister’s was precluded from double-counting the days for multiple assessments.

This argument failed for one seemingly obvious reason; there was no 2015 assessment.  If there was no 2015 assessment, no days could have been double counted.

Ultimately the Court iterated the principle that there must be a factual basis for an argument to be legally valid.  The Court dismissed the appeal with costs to the Crown.

Amit Ummat