Regulation 105: paying a non-resident for work done in Canada

A Canadian company hires a Seattle consultant for a week in Abbotsford, pays the invoice in full and forgets it. Regulation 105 exists to interrupt that, and missing it costs the payer, not the consultant.

What Regulation 105 requires

Paragraph 153(1)(g) of the Income Tax Act and subsection 105(1) of the Income Tax Regulations are the authority to withhold tax on fees, commissions and other amounts paid to non-residents of Canada, other than employees, for services rendered in Canada. The rate of withholding is 15% of the gross amount paid.

Three features of that sentence do most of the work in practice:

• It applies to every payer. The CRA states that every payer, including a non-resident payer, who makes a payment of fees, commissions or other amounts to a non-resident in respect of services provided in Canada must withhold and remit.
• It is measured on gross, not net. The 15% comes off the full amount paid, before any deduction for the non-resident’s own costs.
• It applies to services rendered in Canada. Physical presence and where the work is performed matter more than where the contract was signed or where the invoice was sent from.

What it is not

Regulation 105 covers non-residents who are not employees. Non-resident employment services fall under Regulation 102, with its own waiver and employer certification regime. The same classification test used at home decides which applies. See subcontractor versus employee.

Nor is it final. The CRA treats the withholding as a payment on account of the non-resident’s Canadian tax. A return may settle the final amount, with the 15% credited.

Remitting and reporting

Regulation 108 requires withheld amounts to be remitted by the 15th of the month after the month deducted. Reporting is separate and unconditional: every payer, resident or not, reports payments to non-residents for services in Canada on a T4A-NR slip, regardless of the amount paid or tax withheld, the CRA states.

T4A-NR slips and the T4A-NR Summary go to the CRA by the last day of February after the year paid, with a copy to the recipient. If your calendar covers T4, T4A and T5 deadlines, this is the one usually missing.

Waivers and reductions

The CRA does not want to burden non-residents who may owe no Canadian tax. If one shows the withholding exceeds their final liability, the CRA may reduce or waive it under subsection 153(1.1), the undue hardship provision. The onus is on the non-resident, usually via a treaty position or estimated income and expense statement.

Two practical points matter more than the form itself:

• Apply early. The CRA indicates a request for a reduction or waiver should normally be filed 30 days before the services begin in Canada, or 30 days before the first payment is due for those services.
• Until written notification arrives, withhold. The CRA is explicit that if the payer has not obtained written notification from the CRA, the required withholding is mandatory. A pending application is not a waiver.

What happens if you do not withhold

Failing to deduct or remit under Regulation 105 can bring an assessment for the amount, plus interest and penalty, under section 227 of the Act. The exposure is the payer’s, even though the full payment has already gone to the non-resident. That is why to sort it out before paying the invoice.

How to handle it in practice

• Ask the question at engagement, not at payment. Where will the work physically be performed, and is the supplier a non-resident? Those two answers decide everything else.
• Put the withholding in the contract. A non-resident who has not been told about a 15% deduction will treat it as a shortfall on the invoice. Saying so up front avoids a dispute and gives them time to apply for a waiver.
• Register the accounts you need. Withholding and slip filing run through CRA program accounts; if this is new territory, start with your business number and program accounts.
• Do not confuse this with GST/HST. Cross-border service payments raise sales tax questions of their own, covered separately in GST/HST on exports and non-residents.
• Keep Part XIII separate in your head. Payments of rent, dividends, interest or royalties to a non-resident are a different withholding regime with different rates and a different slip. See NR4 slips and Part XIII tax.

The bottom line

Regulation 105 is a cash-flow mechanism dressed as a tax rule: a deposit against tax a visiting provider may owe, collected by the payer. The rule of thumb: if a non-employee non-resident works physically in Canada, withhold 15% of the gross until the CRA says otherwise in writing.

This article is general information for Canadian business owners and is current as of July 2026. It is not tax, legal or accounting advice, and it does not create a client relationship. Tax rules change and your situation is unique, so please speak with a CPA before acting on anything here.