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Unformatted text preview: business by the income recipient in its residence country to the value of such assets used or held for use in the source country, 2. the ratio of gross income derived from the active conduct of the trade or business by the income recipient in its residence country to the gross income derived in the source country, and 3. the ratio of payroll expense of the trade or business for services performed in the residence country to the payroll expense for services performed in the source country.
The foregoing safe-harbour rule mirrors the safe-harbour rule in article 30(2)(b) of the us-France treaty.44 assets, gross income, and payroll expense are taken into account in computing these ratios only if the income recipient has an ownership interest, directly or indirectly, in the source-country entity.45
because no safe-harbour rule is included in article xxix a(3) of the Canada-us treaty, the substantiality test must be based solely on the relevant facts and circumstances. since the substantia...
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