New tax rules for non-residents working in Canada explained

Are you a non-resident of Canada with a temporary job assignment in Canada?  If yes, then read this article to learn about your Canadian tax obligations.  The Canadian Federal Government has recently enforce new tax rules.

As a non-resident employee working in Canada working for a non-Canadian employer, Canadian payroll taxes must and will be deducted from your paychecks.  Dealing with Canadian payroll taxes can be a major burden for both employers and employees.

To avoid paying Canadian payroll taxes, you and your employer could complete a Regulation 102 Waiver with the Canada Revenue Agency, but the Agency is extremely slow, making this process frustrating.  Your only other option in the absence of a Waiver is to file a non-resident tax return with the Canada Revenue Agency to recover the payroll taxes deducted from your paychecks.

Now, the government of Canada is proposing to change these rules as announced in its 2015 Federal Budget, such that non-resident employees working in Canada for a non-Canadian employer will not be subject to Canadian payroll taxes if these conditions are met:

• You are a resident of a country that has a tax treaty with Canada (e.g. the United States)
• You earned less than $10,000 from your employment in Canada, subject to the relevant tax treaty
• You were in Canada for less than 90 days

Your employer must complete a form with the CRA for all non-resident employees who are exempt from Canadian payroll taxes as a result of the conditions above.  If you are exempt from Canadian payroll taxes, you do not have to file a Canadian tax return.

So here’s the tip:  Before accepting a job offer to work in Canada, consult with your accountant to see if you can be exempt from Canadian payroll taxes.  For more information on payroll and withholding taxes, you might want to take a look at this article on non-resident withholding tax – what is section 217?

ABOUT THE AUTHOR

ALLAN MADAN

CPA, CA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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