primarily in transporting passengers or goods in international traffic — determined as if,
except where paragraph (c) of the definition “international traffic” in this subsection applies,
any port or other place on the Great Lakes or St. Lawrence River is in Canada — including
the chartering of the ship, provided that one or more persons related to the operator (if the
operator and each such person is a corporation), or persons or partnerships affiliated with the
operator (in any other case), has complete possession, control and command of the ship, and
any activity incident to or pertaining to the operation of the ship, but does not include
(a) the offshore storing or processing of goods,
(b) fishing,
(c) laying cable,
(d) salvaging,
(e) towing,
(f) tug-boating,
(g) offshore oil and gas activities (other than the transportation of oil and gas), including
exploration and drilling activities,
(h) dredging, or
(i) leasing a ship by a lessor to a lessee that has complete possession, control and command
of the ship, unless the lessor or a corporation, trust or partnership affiliated with the
lessor has an eligible interest (as defined in subsection 250(6.04)) in the lessee. . . .
14
Of particular note among the exclusions set out in the definition of “international
shipping” is the final listed exclusion in subsection (i), which ostensibly excludes
bareboat chartering to a party unrelated to the corporation from qualifying as
international shipping.
15 This exclusion is arguably consistent with the intent of
the overall scheme of the amendments to the Income Tax Act in that bareboat
chartering does not necessarily involve the operation or management of ships by
an operator who, as a consequence, might be in a position to bring ship management
expertise, skill and employment opportunities to Canada.
“International traffic” is defined, in turn, as follows:
. . .in respect of a person or partnership carrying on the business of transporting passengers or
goods, a voyage made in the course of that business if the principal purpose of the voyage is
to transport passengers or goods
(a) from Canada to a place outside Canada,
(b) from a place outside Canada to Canada, or
(c) from a place outside Canada to another place outside Canada. . . .
16
14 Income Tax Act, s. 248(1). Prior to 2014, the Income Tax Act did not refer to or define
“international shipping” but instead, as mentioned above, referred to the “operation of a ship” in
international traffic. This addition and the amendment of section 81(1)(c) of the Income Tax Act
appears to have stemmed from confusion as to what specific activities were encompassed by the
term “operation of a ship”, which was not defined in the Income Tax Act. See, for instance, Canada
Revenue Agency, 31 March 1993, External T.I. 9304475 and Brief from Teekay Shipping (Canada)
Ltd. (2011)—http://www.ourcommons.ca/Content/Committee/411/FINA/WebDoc/WD5138047/
411_FINA_PBC2011_Briefs/Teekay%20Shipping%20(Canada)%20Ltd%20E.html.
Accessed
27 December 2018. See also Minister of Finance, Explanatory Notes Relating to the Income Tax
Act, Excise Tax Act, Excise Act, 2001 and Related Legislation, October 2014—https://www.fin.gc.
ca/drleg-apl/2014/bia-leb-oct20-1014-n-eng.asp. Accessed on 27 December 2018.
15 Income Tax Act, s. 248(1) and Minister of Finance (October 2014).
16 Income Tax Act, s. 248(1).
462
F. M. Manolis and R. L. Bozzer
except where paragraph (c) of the definition “international traffic” in this subsection applies,
any port or other place on the Great Lakes or St. Lawrence River is in Canada — including
the chartering of the ship, provided that one or more persons related to the operator (if the
operator and each such person is a corporation), or persons or partnerships affiliated with the
operator (in any other case), has complete possession, control and command of the ship, and
any activity incident to or pertaining to the operation of the ship, but does not include
(a) the offshore storing or processing of goods,
(b) fishing,
(c) laying cable,
(d) salvaging,
(e) towing,
(f) tug-boating,
(g) offshore oil and gas activities (other than the transportation of oil and gas), including
exploration and drilling activities,
(h) dredging, or
(i) leasing a ship by a lessor to a lessee that has complete possession, control and command
of the ship, unless the lessor or a corporation, trust or partnership affiliated with the
lessor has an eligible interest (as defined in subsection 250(6.04)) in the lessee. . . .
14
Of particular note among the exclusions set out in the definition of “international
shipping” is the final listed exclusion in subsection (i), which ostensibly excludes
bareboat chartering to a party unrelated to the corporation from qualifying as
international shipping.
15 This exclusion is arguably consistent with the intent of
the overall scheme of the amendments to the Income Tax Act in that bareboat
chartering does not necessarily involve the operation or management of ships by
an operator who, as a consequence, might be in a position to bring ship management
expertise, skill and employment opportunities to Canada.
“International traffic” is defined, in turn, as follows:
. . .in respect of a person or partnership carrying on the business of transporting passengers or
goods, a voyage made in the course of that business if the principal purpose of the voyage is
to transport passengers or goods
(a) from Canada to a place outside Canada,
(b) from a place outside Canada to Canada, or
(c) from a place outside Canada to another place outside Canada. . . .
16
14 Income Tax Act, s. 248(1). Prior to 2014, the Income Tax Act did not refer to or define
“international shipping” but instead, as mentioned above, referred to the “operation of a ship” in
international traffic. This addition and the amendment of section 81(1)(c) of the Income Tax Act
appears to have stemmed from confusion as to what specific activities were encompassed by the
term “operation of a ship”, which was not defined in the Income Tax Act. See, for instance, Canada
Revenue Agency, 31 March 1993, External T.I. 9304475 and Brief from Teekay Shipping (Canada)
Ltd. (2011)—http://www.ourcommons.ca/Content/Committee/411/FINA/WebDoc/WD5138047/
411_FINA_PBC2011_Briefs/Teekay%20Shipping%20(Canada)%20Ltd%20E.html.
Accessed
27 December 2018. See also Minister of Finance, Explanatory Notes Relating to the Income Tax
Act, Excise Tax Act, Excise Act, 2001 and Related Legislation, October 2014—https://www.fin.gc.
ca/drleg-apl/2014/bia-leb-oct20-1014-n-eng.asp. Accessed on 27 December 2018.
15 Income Tax Act, s. 248(1) and Minister of Finance (October 2014).
16 Income Tax Act, s. 248(1).
462
F. M. Manolis and R. L. Bozzer