Canada: Welcome withholding relief for foreign employers with frequent business travelers to Canada
International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Canada: Welcome withholding relief for foreign employers with frequent business travelers to Canada

jamal.jpg

maclagan.jpg

Soraya Jamal


Bill Maclagan

Canada's 2015 Budget contains relieving measures to reduce withholding tax obligations for non-resident employers with frequent business travelers to Canada. The relieving measures are expected to alleviate the administrative burden imposed on non-resident employers that have short term non-resident employees working in Canada. Generally, a non-resident is subject to Canadian tax on employment income earned in Canada, subject to treaty relief. A non-resident employer is required to make Canadian employment payroll withholdings on remuneration paid to an employee who works in Canada, even if that employee is exempt from Canadian tax under an applicable treaty. An employer is only relieved from such withholding obligations where a treaty-based waiver is obtained from the Canada Revenue Agency (CRA). Such waivers are available only in limited circumstances, must be obtained separately for each employee, and have proved to have limited utility in practice.

Budget 2015 proposes an exception to the withholding obligations imposed on a qualifying non-resident employer on payments made to a non-resident employee that is: (i) exempt from Canadian income tax under a tax treaty; and (ii) not in Canada for 90 or more days in any 12 month period that includes the time of payment. A qualifying non-resident employer must be resident in a country with which Canada has a tax treaty and must not carry on business through a Canadian permanent establishment (as defined by regulation, as opposed to the applicable treaty). Additionally, a qualifying non-resident employer must be certified by the Minister of National Revenue at the time the payment is made. To become certified, an employer must file a prescribed form certifying certain conditions (all of which are not known yet). Special rules will apply to employers that are partnerships.

Where the foregoing conditions are satisfied, a non-resident employer will be exempt from Canadian payroll withholding and remittance requirements. However, the employer must continue with its reporting requirements for such payments (for example, filing T4 returns). The extent to which non-resident employers find the new exemption helpful remains to be seen. As is now proposed, the decision to certify and qualify a non-resident employer is discretionary, even if all the required conditions are met. Also, the application for certification will serve to notify CRA about a non-resident's presence in Canada, affording CRA an opportunity in advance to take a position on whether the non-resident is carrying on business in Canada, or doing so through a Canadian permanent establishment. The proposed withholding relief will apply in respect of payments made after 2015.

Soraya Jamal (soraya.jamal@blakes.com) andBill Maclagan (bill.maclagan@blakes.com)

Blake, Cassels & Graydon

Tel: +1 604 631 3300

Fax: +1 604 631 3309

Website: www.blakes.com

more across site & bottom lb ros

More from across our site

The reported warning follows EY accumulating extra debt to deal with the costs of its failed Project Everest
Law firms that pay close attention to their client relationships are more likely to win repeat work, according to a survey of nearly 29,000 in-house counsel
Paul Griggs, the firm’s inbound US senior partner, will reverse a move by the incumbent leader; in other news, RSM has announced its new CEO
The EMEA research period is open until May 31
Luis Coronado suggests companies should embrace technology to assist with TP data reporting, as the ‘big four’ firm unveils a TP survey of over 1,000 professionals
The proposed matrix will help revenue officers track intra-company transactions from multinationals
The full list of finalists has been revealed and the winners will be presented on June 20 at the Metropolitan Club in New York
The ‘big four’ firm has threatened to legally pursue those behind the letter, which has been circulating on social media
The guidelines have been established in the wake of multiple tax scandals and controversies that have rocked the accounting profession
KPMG Netherlands’ former head of assurance also received a permanent bar and $150,000 fine; in other news, asset management firm BlackRock lost a $13.5bn UK tax appeal
Gift this article