Under Regulation 102 of the Income Tax Act, non-Canadian resident employers with non-resident employees working in Canada can now apply to qualify for a new exception from the withholding tax requirements.
Under the provisions of many of the double tax treaties concluded by Canada non-resident employees do not need to pay tax in Canada where their total working days in Canada, or total remuneration earned in Canada, is a relatively nominal amount. The relevant maximum amount is specified in each treaty.
A foreign employer may therefore now apply to the Canadian Revenue Agency (CRA) for a waiver from its obligation to withhold tax from the remuneration of any foreign employee that would come within the exception specified in the relevant tax treaty.
This exception is effective from January 1, 2016. On or before February 1, 2016, all applications for employer eligibility need to be received by the CRA. Employers that want to apply the exception to their eligible employees from 1 January 2016 must try to meet the February 1, 2016 deadline to submit their applications.
