Income Tax Act Subsections 124(1) and 124(4)

Income Tax Regulations subsection 400(2)

A permanent establishment is a fixed place of business, which allows a certain jurisdiction to tax the income being made at that fixed place of business.

The typical types of permanent establishment are:

  1. A fixed place of business;
  2. A construction of project;
  3. An agency permanent establishment;
  4. Rental operation; and
  5. Subsidiary of a corporation.

If a business is found to be operating here in Canada or in a certain province through a permanent establishment, their income will be subject to tax here in Canada and in that province. This is why it is incredibly important not to run afoul of this rule.

With the global economy of today, it can be very difficult to determine whether a business is operating through a permanent establishment. Tax treaties further complicate the matter by detailing what may, or may not qualify as a permanent establishment between countries.


CRA Resources

IT-177R2 – Permanent Establishment of a Corporation in a Province (

GST/HST Policy Statement P-208R – Meaning of “Permanent Establishment” in Subsection 123(1) of the Excise Tax Act (the Act) (