Canada Tax: Qualifying Non-Resident Employer And Withholding Tax

A qualifying non-resident employer can be certified and thus will have to withhold tax from the salary or other compensation paid to qualifying non-resident employees in Canada (to be covered in a future FAQ). This eliminates withholding taxes. Which can be a big cash flow savings. The certification will be valid for up to two calendar years.

To be eligible to be a qualifying non-resident employer, the employer must be a resident in a country that has a tax treaty with Canada.

Then the company needs to complete the Non-Resident Employer Certification form (RC473). The application needs to be submitted at least 30 days before any qualifying non-resident employees start providing services in Canada. Until the form is approved, any payments made to employees need to withhold taxes unless the employee has their own approved waiver (i.e. Regulation 102 waiver).

If the form is approved, there are several obligations of the qualifying non-resident employer.

  • Monitor and record the number of days each qualifying non-resident employee is working or present in Canada and their corresponding income.
  • Ensure that each qualifying non-resident employee is a resident of a country that has a tax treaty with Canada.
  • For employees that do not qualify you must still complete withholdings and regular paperwork like T4 slips.
  • File a Canadian non-resident treaty protective corporate tax return.
  • When requested by the Canada Revenue Agency (CRA), provide access to your books and records in Canada. This is to ensure you are following the conditions of the employer certification agreement.

Have a question? Contact Grant Gilmour.

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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