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Definition of “Permanent Establishment” changes January 1, 2010

Definition of “Permanent Establishment” changes January 1, 2010

Permanent Establishment - Overview
Effective January 1, 2010 the fifth protocol to the US Canada Tax Treaty introduced a new definition of “Permanent Establishment”.  As a result of this change cross border contractors will be deemed to have a permanent establishment in the other country if either:

Permanent Establishment - The Single Individual Test (for Individuals)
Services are performed by an individual who is present in the other Contracting State for more than 183 days in a 12-month period and, during this period, more than 50% of the gross active revenues of the enterprise are generated from these services; or

Permanent Establishment - The Enterprise Test (for Corporations)
Services are provided in the other Contracting State for more than 183 days in a 12-month period with respect to the same or connected project for a customer’s PE in the other Contracting State

All foreign corporations who perform services in Canada must  report the Canadian income to the Canadian Revenue Agency, whether or not a permanent establishment in Canada exists.

Contact Jon Levy at or (514) 282-1836 #275 for more informaton regarding this important change to the US Canada Tax Treaty.

Click here for information regarding withholding taxes for Americans providing services in Canada.

Click here for details about the UHY Canada U.S. Tax Team (CUTT).



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