50 of the 1,000 employees of USco (a US C-Corp and a “qualifying person” for purposes of the Canada-US Treaty) are Canadian residents who are allowed, but not required, to work from home for two or three days a week. Would USco be considered to be carrying on business in Canada for purposes of the Act? Before going on to also address whether USco would have a permanent establishment in Canada, CRA stated:
Some activities performed by employees routinely working from home in Canada and providing internal support will not generally cause USco to be carrying on business in Canada. An accountant or a human resource professional providing services only to USco could be an example of this. However, if USco provides consulting services to its clients and the Canadian resident employee working from home is a part of the service team, the physical location of the individual performing the services might inform the determination of the place where the services are performed. If the clients of USco are also resident in Canada, that might be an additional factor in determining whether USco is carrying on business in Canada. Similarly, should the Canadian resident employees of USco act in a product development role, their activities may bring USco within the extended meaning of carrying on business in Canada under the Act. For example, paragraph 253(a) may be applicable if the product development role amounts to “creating or improving, in whole or in part, anything in Canada”. Paragraph 253(b) of the Act may be engaged if the employee “solicits orders or offers anything for sale in Canada”, which generally includes actively seeking and attempting to obtain customers in Canada, beyond “a mere invitation to treat” or advertisement.