Blog: New certification regime for non-resident employers

January 29th, 2016 Plafonds de déduction fiscale et taux des avantages pour frais d’automobile en 2017

On January 12, 2016, the CRA issued the long awaited form RC473 Application for Non-Resident Employer Certification. This form is issued pursuant to announcements made in the 2015 Federal Budget which promised a red tape reduction for non-resident employers in the form of relief of the obligation to withhold Canadian tax where the employee is exempt from income tax in Canada pursuant to a tax treaty. The certification is available commencing January 1st, 2016. Applications made up to March 1st 2016 are viewed as having been made in the transition period during which the certification can be retroactive to January 1st, 2016. After March 1st, the certification will become effective on the date of reception of the approval letter from CRA. The treatment delay is expected to be approximately 1 month. Considering the change of Federal government in October 2015, the certification has yet to be enacted in law. The CRA has opted to move forward with the certification in accordance with the measure as was previously announced, hoping that legislation will follow shortly.

Application for certification is available to the employer who is either:

  • A resident of a country with which Canada has a tax treaty;
  • A partnership, if 90% of its income is allocated to partners resident of a country with which Canada has a tax treaty; or
  • A US LLC;

The non-resident employer certification can remain valid for a period of up to 2 years provided certain conditions are respected. Employer certification does not require that the non-resident employer be compliant with its Canadian tax withholding obligations for the years prior to 2016. However, obtaining the certification for 2016 or after will not provide any amnesty for previous non-compliance of the non-resident employer.

Once certified, the employer will no longer be required to withhold Canadian income tax at source on remuneration paid to an employee who meets all of the following conditions:

  • The employee is a resident of a country with which Canada has a tax treaty on the date of the payment;
  • The employee is not liable to income tax in Canada because of the tax treaty; and,
  • The employee either works less than 45 days in Canada during the calendar year that includes the date of the payment or is present in Canada less than 90 days in any 12 month period that includes the date of the payment;

Obligations under the CPP and EI regime are not covered by the certification. The non-resident employer must still ensure that an exemption is available before forgoing any CPP or EI remittance. The existing Regulation 102 tax waiver remains available for situations where the non-resident employee will not meet the “days in Canada” tests to benefit from the non-resident employer certification. The certified non-resident employer will still be required to complete and file T4 slips and summary for non-resident employees who receive remuneration for their services rendered in Canada that exceeds CAD$10,000.

The new non-resident employer certification can benefit employers who send employees to Canada for sales or representation purposes, to provide training or seminars, to supervise construction sites or for equipment installation mandates. We can assist in assessing your needs and evaluate whether the non-resident certification can be beneficial.

 

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