Treaty - response to your email
B W wrote:David,
I'm not sure I agree with your interpretation of the treaty changes. My understanding is that the Independent Personal services is now covered by the business profits article. In other words, a consultant would need to have a permanent establishment in Canada before Canada was entitled to tax the income. In other words, the fixed base concept is replaced by the PE.
I don't believe the consultant's income would fall under Article 15 which is now titled "Income from Employment" unless the consultant is an employee.
Thanks for the interesting discussion.
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david ingram replies:
I agree with your thought but disagree with the actaul outcome.
Taking out article XIV was (in my opinion) a clear attempt to clear up the tax problems with the contract employee consultants.
It depends upon the visa issued, and in my opinion, no 'issued' visa qyalifies for business profits under normal circumstances.
For instance, the terms of a TN is that one can NOT be self-employed. By definition then, a management consultant TN is / must be an employee. He or she may be an employee without benefits but they are an employee nevertheless. My understanding is that the intention is to tax any of the management consultant types who have been showing themselves as self-employed which only makes sense.
If someone is genuinely in business, has muiltiple clients and no fixed base (including an apartment to live in), then they may be self-employed with business profits but then they will not be working on an H1, L1, or TN visa.
If they have an E-2, they 'will' be self employed but by definition, they will now have a fixed base since the temrs of an E-2 are a fairly major investment in that US busines.
In my opinion, the only one who will now qualify is the person who has a legitimate full time business in either country and goes to the other country to gather information and take it back to their home country.
For instance, with a US B-1 visa status, I might go to your place in Texas and gather up a bunch of work and bring it back to Canada where I look after it.
BUT, as soon as "I" get a TN or an H1 to maybe actaully do the work in the USA, I am an employee. Remember that the terms of Article XV now states 'salaries, wages and other remuneration' .
I may be wrong and stated that I was willing to take other opinions. So far, you are the only one to take exception to the opinion. I expect that in the next few months, better counsel than I will have decided where it is going to go.
Thanks for the opinion. Further opinions welcomed.
I'm not sure I agree with your interpretation of the treaty changes. My understanding is that the Independent Personal services is now covered by the business profits article. In other words, a consultant would need to have a permanent establishment in Canada before Canada was entitled to tax the income. In other words, the fixed base concept is replaced by the PE.
I don't believe the consultant's income would fall under Article 15 which is now titled "Income from Employment" unless the consultant is an employee.
Thanks for the interesting discussion.
--------------------------------------------------------------------------------------------
david ingram replies:
I agree with your thought but disagree with the actaul outcome.
Taking out article XIV was (in my opinion) a clear attempt to clear up the tax problems with the contract employee consultants.
It depends upon the visa issued, and in my opinion, no 'issued' visa qyalifies for business profits under normal circumstances.
For instance, the terms of a TN is that one can NOT be self-employed. By definition then, a management consultant TN is / must be an employee. He or she may be an employee without benefits but they are an employee nevertheless. My understanding is that the intention is to tax any of the management consultant types who have been showing themselves as self-employed which only makes sense.
If someone is genuinely in business, has muiltiple clients and no fixed base (including an apartment to live in), then they may be self-employed with business profits but then they will not be working on an H1, L1, or TN visa.
If they have an E-2, they 'will' be self employed but by definition, they will now have a fixed base since the temrs of an E-2 are a fairly major investment in that US busines.
In my opinion, the only one who will now qualify is the person who has a legitimate full time business in either country and goes to the other country to gather information and take it back to their home country.
For instance, with a US B-1 visa status, I might go to your place in Texas and gather up a bunch of work and bring it back to Canada where I look after it.
BUT, as soon as "I" get a TN or an H1 to maybe actaully do the work in the USA, I am an employee. Remember that the terms of Article XV now states 'salaries, wages and other remuneration' .
I may be wrong and stated that I was willing to take other opinions. So far, you are the only one to take exception to the opinion. I expect that in the next few months, better counsel than I will have decided where it is going to go.
Thanks for the opinion. Further opinions welcomed.
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