CRA determines a services PE of a U.S. partnership based on the collective Canadian activities of all its partners

Under the services PE definition in the Canada-U.S. Treaty (Art. V(9)), a U.S. “enterprise” can have a Canadian permanent establishment if (a) it derives more than 50% of its revenues in a 12-month period from services of an individual present in Canada for at least 183 days in that period, or (b) it performs services in Canada on a project for a Canadian client for at least 183 days in a 12-month period. CRA considers that the determination of whether a U.S. (or other non-resident) partnership has a Canadian PE is made at the partnership level – but by reference to the activities carried on by each partner through the partnership.

For example, if only one of the two U.S. partners of a U.S. partnership is present in Canada working on a project for a Canadian client (thereby generating more than 50% of partnership revenues) but that presence exceeds the 183-day presence test under the (a) test, the partnership and, thus, both partners will have a Canadian PE under Art. V(9), so that the second partner will also be subject to Canadian tax on the income attributable to that PE.

Under the para. (b) test, if they each provide services in Canada for less than 183 days but collectively exceed this threshold, the same result obtains.

Neal Armstrong. Summary of 14 December 2015 Memo 2014-0558661I7 under Treaties – Art. 5.