Canadian Tax on Visiting US Consultant

[davidstreicher]

A US engineering consultant will be coming to Canada every month or so to meet with existing and prospective clients. He will be in Canada just a few days at a time, and most of the work will be done in the US. The US-Canada treaty says a US resident has a permanent establishment in Canada if the person has and habitually exercises the authority to conclude contracts. Does that mean every US consultant who does projects in Canada automatically has a PE because of the authority to sign engagement letters with clients? Perhaps the word "habitually" is the key to avoiding PE. Any thoughts?

[nelsona]

You are misreading the clause.

This paragraph require 2 entities.In such cases, a "independant contractor" living in US that has an Cdn agency send him to various contracts, would be considered as working for that agency, making the agency a permanent establishment.

From what you describe, the contractor is simply acting on his own behalf, thus no agent, and no permanent establishment on that basis.

[JGCA]

Under the new treaty he would have a PE if he spends more than 183 days in Canada in any 12 month period, so depends on how many days hes up here in any 12 month period.

[nelsona]

JG, yes, but there is also the clause above which would establish PE, regardless of days. It's still in the treaty.

[JGCA]

Yes that section is still in, but the 183 rule is new now with respect to a PE as was being discussed so both of these would play into the determinatin of PE and any one will suffice.

[nelsona]

"a few days at a time", was the original scenario.

The question dealt with whether the ability to negiciate set up a PE, by treaty. It does not.