Withholding Relief For Nonresident Employees In Canada

Canada's 2015 federal budget introduced legislative amendments to alleviate the administrative burden imposed on foreign employers by section 102 of the regulations (regulation 102) to the Income Tax Act. In short, qualifying nonresident employers can now apply for an exemption on the withholding obligations in regulation 102 regarding salary, wages, and other forms of remuneration paid to all qualifying nonresident employees.

Regulation 102 and the Existing Regime

ITA subsection 153(1) requires every employer to withhold and remit amounts from salaries, wages, and other forms of remuneration paid to its employees for services rendered in Canada. Those obligations apply to both resident and nonresident employers. Failure to withhold and remit the amounts can result in the employer being liable to pay the amount that should have otherwise been withheld, along with any applicable interest and penalties.