HRS insights : U.S. employees in Canada under an intercompany services agreement: Exempt from Canadian tax under the treaty?

The Canada Revenue Agency (CRA) has provided its views on the income tax remitting, withholding and reporting implications that arise when USco, a U.S. company:

  • Sends its U.S.-resident employees to Canada to perform services (e.g., administration, management, technical assistance) for its subsidiary, Canco, but they do not spend more than 183 days in Canada in any twelve-month period
  • Charges Canco for those services under an intercompany services agreement
  • Does not carry on any business in Canada or have a permanent establishment here

The CRA considers this situation from both the employee’s and Canco’s perspectives.