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Tax consequences for multinationals sending employees to Canada

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Multinational corporations sending employees to foreign countries on business must be alert to the legal responsibilities that can arise from such transfers. Dentons partner Emmanuel Sala clarifies the Canadian and Quebec fiscal rules and mechanisms that govern US parent corporations with US employees employed in Canada. His article covers both Canadian federal and Quebec provincial payroll tax obligations. Regarding Canadian federal tax obligations, Emmanuel notes that if a US parent corporation is determined to have a “permanent establishment” (PE) in Canada, business profits attributable to the PE would be subject to Canadian federal income tax and various forms of tax relief would become unavailable. He provides an in-depth review of the most common situations that might give rise to a PE determination, including fixed-base, agency, construction-site and service. Emmanuel also discusses the possibility of implementing secondment arrangements to mitigate the risk of a PE determination.

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