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

A Canadian company hires a consultant based in Seattle to spend a week on site in Abbotsford. The invoice arrives, the company pays it in full, and nobody thinks about it again. That is the sequence Regulation 105 is designed to interrupt, and the cost of missing it falls on the payer rather than on 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. Employment services provided in Canada by a non-resident fall under Regulation 102 instead, which has its own waiver process and its own certification regime for qualifying non-resident employers. The worker-classification question that decides which regime applies is the same one Canadian businesses face domestically — see the guide on subcontractor versus employee.

It is also not a final tax. The CRA describes the required withholding as a payment on account of the non-resident's overall tax liability to Canada. The non-resident may still have to file a Canadian return to determine the final liability, and the 15% is credited against it.

Remitting and reporting

Regulation 108 requires withheld amounts to be remitted by the 15th of the month following the month in which they were deducted. Reporting is separate and unconditional: all payers, resident or non-resident, must report payments to non-resident persons for services provided in Canada on a T4A-NR slip, and the CRA states the slip is completed and issued by the payer regardless of the amount paid or the taxes withheld.

The T4A-NR slips go to the CRA with a T4A-NR Summary by the last day of February of the year following the year in which the income was paid, with a copy to the non-resident recipient by the same date. If your slip calendar already covers T4, T4A and T5 deadlines, this is the one that tends not to be on it.

Waivers and reductions

The waiver process exists because the CRA does not intend to inconvenience non-residents who may not be taxable in Canada at all. Where a non-resident can adequately demonstrate that the normal withholding exceeds their ultimate Canadian tax liability, the CRA may reduce or waive it. This runs through subsection 153(1.1), the undue hardship provision, and the onus is on the non-resident — typically on the basis of a treaty position or an estimated statement of income and expenses.

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

Failure to deduct or remit an amount under Regulation 105 may result in an assessment of the outstanding amount, plus interest and penalty, pursuant to section 227 of the Act. The exposure sits with the payer, and it does not disappear because the money has already gone out the door to the non-resident in full. That is the whole reason to sort this out before the invoice is paid rather than after.

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. Canada wants a deposit against the tax a visiting service provider might owe, and it makes the person writing the cheque responsible for collecting it. For a small business the practical rule is simple enough to remember: if a non-resident is doing work physically inside Canada and is not your employee, assume 15% comes off the gross until the CRA says in writing that it does not.

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 — please speak with a CPA before acting on anything here.