Tax Insights: Improved processing for Regulation 102 and 105 waiver applications

View this page in: Français

Issue 2013-17

Payments to non-residents of Canada who provide employment services in Canada are subject to the same withholding, remitting and reporting obligations as those for Canadian-resident employees, as Regulation 102 requires.

Even if the employee’s country of residence has an income tax treaty with Canada that exempts his or her income from tax in Canada, the employer must still withhold and remit applicable payroll taxes from the employee, unless the employee has received a Regulation 102 waiver from the CRA. If no waiver is obtained, the tax withheld may still be refundable after the employee files an income tax return.

Payments to non-residents of Canada for services performed in Canada are subject to a 15% withholding, to be remitted to the CRA by the payer, under Regulation 105. This tax is refundable if the non-resident files an income tax return and does not have a permanent establishment (PE) in Canada.

To avoid the 15% withholding, the non-resident must obtain, in advance of the payment, a Regulation 105 waiver from the CRA.

Until recently, employees and non-resident businesses had to submit waiver applications to the TSO for the area where the services were to be rendered.

The CRA has announced that if the waiver applicant will perform services at more than one location in Canada, the application can instead be submitted to one of the new International Waivers Centres of Expertise located at three TSOs: Montreal, Edmonton and Vancouver.