Regulation 102 Withholding: The New Exemption

Employer Withholding Obligations under Regulation 102

Non-resident employers often send employees to Canada to provide services to Canadian clients, to assist a Canadian affiliate, or to attend conferences. Top of mind at these times are immigration issues. However, given that the employees remain on the payroll of the non-resident employer, what is often overlooked are the Canadian income tax withholding and reporting obligations of the employer with respect to the consideration it pays the employees during this time.

Pursuant to paragraph 153(1)(a) of the Income Tax Act¹ ("Act") and section 102 of the Income Tax Regulations (the "Regulations"),² the payor (referred to herein as the "employer") of the remuneration is required to withhold the prescribed amount of Canadian income taxes from the remuneration paid for employment duties performed in Canada and to remit the amount to the Canada Revenue Agency ("CRA"), even when the employee is not resident in Canada