Self-Employed person resident of Canada has a contract with US Company on per-hour basis only as sub-contractor and will be sent to various client sites in US when the actual job comes in.
I understand under the treaty he would be exempt from US taxes unless has fixed base in US. So wouldn’t such relationship with US employer be considered as having an office in US as per:
“The Canadian individual could be deemed to have a permanent establishment in the U.S. if: He has an office in the U.S.; or [b]He uses the services of an agent in the U.S. who has independent authority to enter into contracts on behalf of the individual.â€[/b]
Thank you!
Treaty question - permanent establishment.
Moderator: Mark T Serbinski CA CPA
http://www.serbinski.com/working-in-usa ... tors.shtml
[quote]"Therefore all self-employment income is exempt from U.S. taxation, irrespective of amount or time spent in the United States, so long as it is paid to them personally as self-employed individuals, unless the individual has a fixed base in the United States. The Canadian individual could be deemed to have a permanent establishment in the U.S. if:
a. He has an office in the U.S.; or
b. It uses the services of an agent in the U.S. who has independent authority to enter into contracts on behalf of the individual." [/quote]
[quote]"Therefore all self-employment income is exempt from U.S. taxation, irrespective of amount or time spent in the United States, so long as it is paid to them personally as self-employed individuals, unless the individual has a fixed base in the United States. The Canadian individual could be deemed to have a permanent establishment in the U.S. if:
a. He has an office in the U.S.; or
b. It uses the services of an agent in the U.S. who has independent authority to enter into contracts on behalf of the individual." [/quote]
Serbinski's article is a bit out-of-date with regards to the treaty, since he refers to treaty articles that have been deleted.
But, in essence, if you are working for a US agency that is subcontracting you out, that is a fixed based, by article 5(5). There may be circumstances where an agency is merely a go-between (like a literary agent, or talent agent), but if the clients are hiring the company, which is in turn farming out the work to you, then that is a fixed base.
But, in essence, if you are working for a US agency that is subcontracting you out, that is a fixed based, by article 5(5). There may be circumstances where an agency is merely a go-between (like a literary agent, or talent agent), but if the clients are hiring the company, which is in turn farming out the work to you, then that is a fixed base.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Found something interesting:
http://www.internationallawoffice.com/n ... 247baba0f9
"Two basic types of permanent establishment are common under the treaty. The first type is a “fixed base of business through which the business†of the non-resident taxpayer is wholly or partly conducted, and includes especially a place of management, branch, office, factory, workshop or place of extraction of natural resources.(3) The second type, generally involving the activities of a dependent agent, is based on the existence of a “person acting in a contracting state on behalf of a resident of the other contracting state…if such person has, and habitually exercises in that state, an authority to conclude contracts in the name†of the non-resident taxpayer. Such a person will not be deemed to be a permanent establishment if the person is “broker, general commission agent or any other agent of independent status, provided that… [the agent is] acting in the ordinary course of [the agent’s] business".
So if let's say US Agent just acts on commision passing you contracts (sub-contracting to you the work) and withholding his interest of 5%, in my understanding this should not be considered permanent establishment, also given the fact that in such scenario US comany wouldn't have authority to conclude contracts in the name†of the non-resident taxpayer.
http://www.internationallawoffice.com/n ... 247baba0f9
"Two basic types of permanent establishment are common under the treaty. The first type is a “fixed base of business through which the business†of the non-resident taxpayer is wholly or partly conducted, and includes especially a place of management, branch, office, factory, workshop or place of extraction of natural resources.(3) The second type, generally involving the activities of a dependent agent, is based on the existence of a “person acting in a contracting state on behalf of a resident of the other contracting state…if such person has, and habitually exercises in that state, an authority to conclude contracts in the name†of the non-resident taxpayer. Such a person will not be deemed to be a permanent establishment if the person is “broker, general commission agent or any other agent of independent status, provided that… [the agent is] acting in the ordinary course of [the agent’s] business".
So if let's say US Agent just acts on commision passing you contracts (sub-contracting to you the work) and withholding his interest of 5%, in my understanding this should not be considered permanent establishment, also given the fact that in such scenario US comany wouldn't have authority to conclude contracts in the name†of the non-resident taxpayer.
In other words would the following treaty exception apply if US company is essentially doing same type of business as Canadian resident is doing, but just sub-contracting you part of its work for the 5% commision?
http://www.fin.gc.ca/treaties-conventions/usa_-eng.asp
"7. A resident of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because such resident carries on business in that other State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business."
http://www.fin.gc.ca/treaties-conventions/usa_-eng.asp
"7. A resident of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because such resident carries on business in that other State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business."