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Canada Tax: Qualifying Non-Resident Employee And Withholding Tax



If you are a certified qualifying non-resident employer, then you do not have to withhold taxes from the salary or other compensation paid to employees that are qualifying non-resident employees in Canada.

Discussion:

In order to be a qualifying non-resident employee, the employee must meet the following criteria:

  • Be a resident of a country that has a tax treaty with Canada at the time of the payment;
  • Not be liable for income tax in Canada due to the tax treaty and the type of payment received; and
  • Either works less than 45 days in the calendar year in Canada or is present less than 90 days in any 12 month period in Canada.

Working days are counted based on days in Canada in which the employee is paid for work. This would exclude weekends, days off and holidays. Conversely, days of presence is counted based on days the employee is in Canada whether working or not.

In addition, even though income tax would not be withheld, Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums may still have to be deducted. If the employer does not have an establishment in Canada or the employee has coverage in their country of residence (must produce a certificate of the coverage), then CPP contributions are not required. Similarly, if an employee has comparable coverage in their country of residence, then EI premiums are not required.

Have a question? Contact Grant Gilmour.

Your comments are always welcome!

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Grant has been in the CA business since 1988, starting his own practice in 1994. His tax expertise encompasses tax planning, international tax issues, and Scientific Research and Development tax credits. He is a graduate of the CICA In-Depth Tax Course and in 2012, Grant received the CA Community Service Award and the Scout Leader Medal.

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