14 February 1991 Ministerial Correspondence 903584 F - Canada-U.S. Income Tax Convention

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Dear Sirs:

Re:  Article XV(2)(b) of the Canada-United States Income Tax Convention. 1980 (the "Convention") 

This is in reply to your letter dated December 6, 1990.

Your proposed representation of the Department's position concerning the application of the above-noted provision of the Convention where a United States parent company ("U.S.Co.") performs management services for its Canadian subsidiary ("Cansub") in the course of which some U.S.Co. employees perform services in Canada is not entirely accurate.

In our opinion, whether or not a resident of Canada is an "employer" for purposes of subparagraph 2(b) of Article XV of the Convention is essentially a question of fact.  If an individual comes to Canada and exercises his duties for a Canadian company and the costs, whether directly or indirectly, are borne by the Canadian company, the (rebuttable) presumption is that the Canadian company is an employer and the individual is therefore taxable in Canada.  The individual may be paid by a United States company, but when he is performing his duties under the direction of the Canadian operation, the Canadian company may be an employer of the individual for purposes of this provision of the Convention.

Yours truly,

for DirectorReorganization Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch