As a follow up to our 2015 blog post, the Canadian Federal Budget introduced measures to streamline the Canadian payroll tax withholding requirements for non-resident employers.
The budget introduced an exemption to the Regulation 102 requirement for qualifying non-resident employers on payments made to qualifying non-resident employees who meet the following conditions:
- Is resident in a country that Canada has a tax treaty with at the time of the payment;
- Does not have to pay tax in Canada on the payment because of a tax treaty; and
- Works in Canada for less than 45 days in the calendar year that includes the time of the payment or is present in Canada less than 90 days in any 12-month period that includes the time of the payment.
A qualifying non-resident employer must meet all of the following conditions:
- Resident in a country that Canada has a tax treaty with; and
- Certified by the Minister of National Revenue under subsection 156(7) of the Income Tax Act.
To become certified, the qualifying non-resident employer must file Form RC473, Application for Non-Resident Employer Certification. The form should be filed at least 30 days before the qualifying non-resident employee starts to work in Canada. Certification is valid for 2 years.
For the 2016 tax year, the Canada Revenue Agency (CRA) has indicated that Form RC473 applications must be received by the CRA before the end of day March 1, 2016 for a retroactive certification effective date of January 1, 2016.
The qualifying non-resident employer who files Form RC473 must agree to the following CRA conditions:
- Evaluate and document how the employee meets the definition of a qualifying non-resident employee at the time payment of any employment income;
- Track and document on an ongoing basis the number of days the qualifying non-resident employee is working in Canada or is present in Canada and the employment income that corresponds to these days;
- Obtain a Canadian Business Number;
- File the T4 slip and T4 Summary for the non-resident employee who has provided employment services in Canada and whose total income in Canada is greater than $10,000;
- File Canadian income tax returns for those calendar years covered by the certification period; and
- The books and records will be made available to the CRA for inspection upon request.
This exemption does not cover Canada Pension Plan or Employment Insurance contributions as these are covered under separate tax agreements.
How we can help:
Applying for and complying with the Non-Resident Employer Certification can be complex and involves a number of requirements. Fuller Landau's international tax group can help you navigate all of the filing obligations and ensure you are complying with the regulations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.