Treaty based waivers involving Regulation 102 withholding
As of January 1, 2017, employees can no longer use Form R102-J, Regulation 102 Treaty Based Waiver Application - Joint Employer / Employee. Also, the policies that were unique to waiver applicants using the R102-J form will end. These policies are described below under the heading Application using Form R102-J. Form R102-R will still be available for non-resident employees who are asking for a waiver of amounts to withhold.
Non-resident employees providing employment services in Canada are subject to the same withholding, remitting and reporting obligations as those for Canadian resident employees. Therefore, any employer, including a non-resident employer, is required to withhold amounts on account of the employee’s income tax liability in Canada even if the employee is likely to be exempt from tax because of a tax treaty.
In order for the employer to be relieved of their obligation to withhold tax the employee would have to apply for and receive a waiver of withholding from the CRA.
However, there is an exception to the employer’s withholding obligation for certain non-resident employers paying employment income to non-resident employees for performing the duties of an office or employment in Canada after 2015. These non-resident employers, who apply for non-resident employer certification, will not have to withhold and remit tax on the payments they make to non-resident employees who are working in Canada for a limited time and are exempt from tax in Canada under a tax treaty.
Therefore, there is no need for an employee working in Canada to get a waiver of withholding from CRA if their employer has been certified as a qualifying non-resident employer and the employee is a qualifying non-resident employee.
As soon as an employee becomes aware that they will be working in Canada they should confirm if their employer is a qualifying non-resident employer and if they are required to apply for and obtain a waiver of withholding.
Obtaining a treaty based waivers
Employees resident in countries having a tax treaty with Canada that will exempt an employee's income from tax in Canada can apply for a waiver of withholding tax by completing and filing Form R102-R, Regulation 102 Waiver Application, with the Canada Revenue Agency (CRA).
A completed and signed Form R102-R must be submitted 30 days before either the start of the employment services in Canada or the initial payment for the employment services. We will make every effort to process properly completed and documented R102-R waiver applications in situations where they are received less than 30 days prior to the date employment services begin or the payment. The effective date of the Form R102-R waiver will be the date that the waiver application is approved.
If you are a resident of:
- the United States and are expected to earn no more than CAN $10,000; or
- another country that has a tax treaty with Canada and are expected to earn no more than CAN $5,000;
you and your employer may be eligible to apply for a joint employer/employee Regulation 102 waiver on withholding using Form R102-J, Regulation 102 Waiver Application – Joint Employer/Employee instead.
Corporations that pay their sole or primary shareholder for employment services cannot use Form R102-J. Non-residents in the film industry have to use Form R106, Regulation 102 Waiver Application - Film Industry.
Application using Form R102-J
As soon as it is known that the employee will work in Canada, the employer and employee should jointly complete and file Form R102-J, Regulation 102 Waiver Application - Joint Employer/Employee to apply to the CRA for a waiver.
Employees using Form R102-J must be:
- resident in the United States and expected to earn less than $10,000 CAN in the year; or
- resident in another treaty country, expected to earn less than $5000 CAN, and be exempt from tax in Canada.
When an employer and an employee have made a joint application, we expect the following:
- the employer has discussed with the employee, or communicated to them, the requirements for getting an ITN or SIN; and
- the employee is willing to provide the employer with this information.
If a waiver application is approved, we will issue a letter to the employee and the employer, authorizing the employer to not withhold tax on payments made to the employee. The authorization will be effective on whichever date is later:
- the starting date of services provided by the employee in Canada that year; or
- 60 days before the date a complete (except for the ITN) waiver application has been received at the CRA.
However, where audit activity has occurred or remittances have been made for a period, the effective date of the letter approving a tax waiver will not be earlier than that period.
General information – R102-J Waiver Application
Remittances are required on any remuneration paid for services provided in Canada before the effective date of the R102-J waiver letter. Report all remuneration and any withholdings or remittances made on the employee's T4 slip.
The employer is expected to have a process or procedures in place to make sure they can track, record, and report the income attributable to employment in Canada. As the employer, you need to ensure employees:
- know that a tax waiver is required when working in Canada; and
- contact the appropriate payroll or human resources area before coming to Canada.
A request for a reduction or waiver from withholding should normally be filed 30 days before the services are to begin in Canada, or 30 days before the first payment is due for these services. To ensure applications are processed in a timely manner, this 30 day time frame should be respected whenever possible.
Where to send your R102-R and R102-J Waiver Applications
- In cases where the waiver applicant will provide services at numerous locations in Canada, send the waiver application and all attachments to any Tax Services Office (TSO) or Centre of Expertise (CoE) that serves one of these locations. Otherwise, send it to the TSO or CoE that serves the location where the services will be provided. For additional information see: Where to send completed waiver application.
Forms and publications
- R102-R, Regulation 102 Waiver Application
- R102-J, Regulation 102 Treaty Based Waiver Application - Joint Employer / Employee
- R106, Regulation 102 Waiver Application - Film Industry
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