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End of attention
The CFC must carry on business through a permanent establishment in its country of residence for the whole of a statutory accounting period in which it is in existence.
What is a permanent establishment?
The definition of permanent establishment is contained in section 6 of the Act. Broadly, the term includes a place at or through which normal business activities are carried on. However, it specifically excludes a place where a person:
- is engaged in business dealings through a commission agent or broker who is acting in the ordinary course of business and receiving customary rates of remuneration
- is carrying on business through an agent who does not have or does not usually exercise a general authority to negotiate or conclude contracts or to fill orders from stock situated in the country
- maintains the place solely for the purpose of purchasing goods or merchandise.
Partnership with a permanent establishment
Even if the CFC did not carry on business at or through a permanent establishment, the CFC will satisfy this condition if any partnership in which it is a member carried on business at or through a permanent establishment in the country of residence of the CFC.
Did the CFC directly or indirectly through a partnership carry on business through a permanent establishment in its country of residence?
Last modified: 05 Dec 2006QC 18000
The CFC has failed the active income test. Go straight to part 3.