A. GENERAL COMMENT
International tax treaties generally tax income from business on a net basis. This contrasts with the taxation of investment income, which is taxed on a gross basis. In determining liability for tax on business profits, we start with the domestic rule. Most countries have domestic "place of business" or "carrying on business" rules that tax non-residents on their business income within the source country.
As a starting point, and subject to international tax treaty provisions, Canada taxes non-residents on their taxable income that they earn from a business that they carry on in Canada.1 Under Canada's tax treaties, however, the tax bar is raised so that nonresidents are taxable on business income only if they conduct the business through a permanent establishment in Canada.
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Originally published by LexisNexis
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