In the following examples, will a U.S. resident carrying on business in Canada, be considered to be a permanent establishment (“PE”) in Canada, assuming Arts. V(5) and (9) of the Canada-U.S. Treaty do not apply?
- A U.S. resident consultant has a Canadian membership in the workspace and works from a shared workspace in Canada from time to time, providing services and doing sales calls to Canadian clients.
- Rather than open a branch office, a U.S. resident corporation pays for a shared workspace in Canada for use by its Canadian resident employees.
CRA noted that there is no requirement that a place be owned or rented in order to constitute a PE as long as there is a certain amount of space that is at the disposal of the non-resident. Turning to the two examples:
Example 1
The US resident carries on his services business in Canada from a shared workspace on a regular basis. The consultant is likely considered to have a PE in Canada.
Example 2
The fact that another entity owns the shared workspace is not important to the PE analysis – it is enough that the shared workspace is at the non-resident’s disposal. The premises are a fixed location of business in which business is carried on, and would therefore be a PE.