Non-resident withholding tax

Summary

  • A 15% tax must be withheld on non-resident service payments for work done in Canada
  • Departments must obtain and supply all the required information from the non-resident prior to requesting a payment from Accounting Services
  • Non-residents can apply for a waiver from the withholding tax

What is non-resident withholding tax?

The Canada Revenue Agency (CRA) requires a 15% withholding tax on payments for services rendered in Canada by a non-resident individual or business. UVic must remit this15% withholding tax to the CRA.

What types of services and fees does this apply to?

Taxable
  1. Non-employment services performed in Canada
  2. Time charged for travelling
  3. Commissions from ticket sales and contracted fees
Not taxable
  1. Online services performed outside Canada
  2. Actual and reasonable travel costs
  3. Secondments (CRA defined)
  4. Specific US exempt organizations (religious, scientific, literary, educational or charitable)

 What does the non-resident payee need to do?

  • Obtain a CRA identification number prior to, or upon, entry to Canada
  • Individuals require an Individual Tax Number (ITN)
  • Businesses require a Business Number (BN)
  • Provide a copy of all signed contracts
  • Between the payee and UVic
  • Between the payee and any person hired or employed to perform the service
  • For equipment rented outside Canada and brought into Canada for use

What does the UVic department need to do?

  • Ensure the contract/purchase order establishes who will bear the withholding tax liability
  • Obtain the CRA issued ID number from the non-resident (see above)
  • Attach a copy of the waiver approval notification (if applicable) to all payment requests (see waiver details below)
  • Provide the complete mailing address of the non-resident
  • Indicate the dates the non-resident was in Canada

What does Financial Services need to do?

  • Calculate withholding taxes according to the contract/invoice and waiver approval (if applicable)
  • Remit taxes to the CRA on behalf of the non-resident
  • Issue a T4A-NR tax form to the non-resident in February of the following year

*Optional* Withholding tax waiver application

  • Non-residents providing services can apply to have the withholding tax waived or reduced by completing a tax withholding waiver application and submitting it to a CRA tax services office
  • Waiver applications should be received by the CRA 30 days before the service starts or 30 days before the first payment is made
  • If the CRA approves the waiver application, the CRA will provide written notification to the applicant

Additional information and references

  • Bundled goods and services: invoices should indicate the amount for services and amount for goods separately, otherwise tax may be applied to the full invoice
  • Services performed both in and out of Canada: the portion of services performed in Canada must be indicated; normally this is done as the number of days a non-resident was in Canada
  • Discounts: CRA will not accept a 100% discount on fees relating to services performed in Canada by non-residents; any discount must be applied proportionately to the whole invoice
  • Canada Revenue Agency website: rendering services in Canada