CRA indicates that an employee, with general authority to contract, may not be an employer PE while teleworking at his cottage

Mr. X, who while living in Quebec, had been commuting to the sole permanent establishment of his employer in Quebec, from which he was paid, will now telework at his Ontario cottage three days a week, and commute to the Quebec office two days a week. He has the authority to enter into contracts for his employer.

Regarding whether Reg. 400(2) would deem Mr. X's employer to have an Ontario permanent establishment at Mr. X’s cottage, CRA indicated that the “fact that an employee works from home is generally not sufficient to create a fixed place of business of the employer in the province,” and further stated, regarding the “general authority to contract rule” in Reg. 400(2)(b):

[I]n order for the presumption in [Reg.] 400(2)(b) to apply, the employee must not only have general authority to contract for the employer, but the employer must also carry on business in the province through the employee's place of business.

The operation of the source deduction rules turns on whether an employee is considered to “report for work” at an actual establishment of the employer as per Reg. 102(1), or is deemed by Reg. 100(4) to report for work at the establishment of the employer from which the remuneration is paid. CRA went on to indicate that even if the employer were deemed to have a PE in Ontario by Reg. 400(2)(b), this would not be relevant to the question of whether the employee reported for work at an establishment of the employer located in Ontario. Thus, the employee likely would continue to be subject to source deductions on the Quebec scale.

Neal Armstrong. Summaries of 7 October 2022 APFF Federal Roundtable, Q.7 under Reg. 400(2)(b) and Reg. 102(1).