Non-residents that send their employees to Canada are technically required to withhold Canadian payroll tax, or apply for a waiver before each employee works in Canada. For non-resident employers with employees frequently entering Canada for short periods, this creates a significant administrative burden.
The Canadian government has initiated a new program where non-resident employers who apply for a non-resident employer certification will not have to withhold and remit payroll tax paid to all non-resident employees who are working in Canada and are exempt from tax in Canada under the treaty.
The waiver applies to all non-resident employees resident in a country that Canada has a tax treaty with who work in Canada for less than 45 days in the calendar year or is present in Canada for less than 90 days in a 12 month period. The certification will be valid for to two calendar years. Therefore, if an application is filed and accepted for the 2018 year, no further applications will be required again until 2020. This alleviates the burden of filing waiver applications on a project by project basis, as was done in the past by many non-residents doing business in Canada.
This application is filed on an employer basis, effectively registering the non-resident corporation under the program. Once certified by CRA, the employer is not required to withhold Canadian tax on amounts paid to non-resident employees working in Canada for short period of time.
Generally speaking, employers are required to file a T4 slip and a T4 Summary reporting remuneration and tax withholdings for all employee who has provided services in Canada. However, if after reasonable enquiry, the employer has no reason to believe that the employee’s total taxable income earned in Canada in the calendar year during which the salary was paid is more than CAN $10,000, the employer does not have to file a T4 slip and a T4 Summary for that employee.
If you have any questions on this new process or would like to discuss your eligibility for the non-resident certification, please do not hesitate to contact a member of BHD in Canada.