The general thrust of the provisions of Article VIII is to assign the taxation of income earned in the course of international transportation exclusively to the Residence State of the operator or owner, unless such income was earned in the course of inland transportation in the source State.

Both the Act and the Internal Revenue Code contains specific and rather narrow provisions that grant exemption from domestic taxation to business income earned by international shipping companies and airlines in international traffic. Article 8 expands the scope of this exemption, both in respect of the persons and income eligible for the exemption from the source State taxation.

Article 8 also addresses the needs of trucking and railway industries and expands the exemption to persons resident in the Residence State carrying international transportation business as a common or contract carrier. Article 8 also deals with the income earned by a resident of a Contracting State from the use of containers in international and inland transportation.

References:

Advisor’s Guide to Canada – U.S. Tax Treaty

By:  Vitaly Timokhov, Raymond Montero, David Kerzner

Published by: Thomson Carswell