Tag Archives: Income Tax Regulations

Canadian Payroll Deductions Waiver for Non-Resident Employees: Administrative Relief for the “Qualified”

In the 2015 Canadian Federal Budget, the Minister of Finance announced a program aimed at easing the administrative burden associated with Canadian withholding on remuneration paid to non-resident employees who performed duties in Canada.

Section 102 of the Income Tax Regulations (“Reg. 102″) requires every employer (whether a resident or non-resident of Canada) that pays remuneration to a non-resident employee, with respect to employment duties performed in Canada, to withhold Canadian taxes and other payroll remittances on that remuneration.

Before these Budget 2015 changes, there was no de-minimus exception[1] and, while a tax treaty may ultimately provide an exemption from tax and payroll remittances, it does not exempt the employer from the initial withholding requirement.  In fact, the only way an employer could be exempted from their withholding obligations was to apply, in advance, for a Reg. 102 waiver for each individual non-resident employee that was to perform duties in Canada.  In order to obtain this Reg. 102 waiver an application had to be sent to the Canada Revenue Agency (CRA) at least 30 days before the start of the employment services or the first payment.  Since employee travel is often arranged on short notice, this requirement created an issue for multinational companies doing business in Canada.

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