Under Canada’s tax system, an individual’s tax obligation to Canada is based on their residency status.
An individual is a “non-resident” for tax purposes if they:
- normally, customarily, or routinely live in a country outside of Canada.
- do not have significant residential ties in Canada (for example, does not maintain a dwelling, have a spouse/common-law partner, or dependents in Canada).
Even if you do not have residential ties with Canada, you can be deemed a resident of Canada for tax purposes if you spend more than 183 days in Canada in the course of a one-year period.
Resources
- Canada Revenue Agency (CRA) - Determining your residency status
Non-resident employees
Non-resident engaged as an employee where the work is performed in Canada
Non-resident employees are hired and paid in the same manner as employees who are Canadian residents with their pay being subject to deductions for income tax, CPP contributions and EI premiums. These individuals are required to have a valid work or study permit and Social Insurance Number (SIN) in order to be paid through payroll.
Where the individual is a resident of a country which has a reciprocal tax treaty with Canada, they may be able to be fully or partially exempted from paying income tax in Canada. The employee must apply for a Regulation 102 waiver through the CRA and, once approved, present the CRA approved documentation to payroll. The CRA recommends that waiver applications be submitted 30 days prior to the beginning of the employment period to allow time for processing.
Resources
- Additional information on taxation of non-resident employees
- Information on Tax Treaties currently in force
- Regulation 102 Waiver Application (PDF)
Non-resident engaged as an employee where the work is performed outside of Canada
If you are considering engaging a non-resident individual in an employment relationship where the work will be performed outside of Canada, the University of Waterloo may have legislative obligations related to employment, compensation, and taxation in the foreign country. Please contact Human Resources (HR) for guidance in advance of establishing any such employment contract.
Other payments to non-residents (non-employment)
Other payments include non-employment amounts such as honorariums, external reviewer/examiner payments, or payment of guest lecturer/speaker fees.
Where service is rendered in Canada
Non-resident individuals receiving payment for non-employment services rendered in Canada do not require a SIN; however it is recommended that they apply for an Individual Tax Number (ITN).
Payments are subject to withholding of 15%exception* income tax. Individuals who are considered self-employed can apply for a tax waiver under Regulation 105 of the Canadian Income Tax Act. It is recommended that waiver applications be submitted to the Canadian Revenue Agency at least 30 days in advance of the service being rendered. If a waiver is approved by the CRA, a copy of the letter should be provided along with the payment request when submitted to HR.
A T4A-NR form for tax reporting purposes will be issued to the individual in February of the following calendar year.
*Exception – The Canada/U.S. Tax Treaty allows for a reduced withholding of 10% on amounts of $5,000 or less. If payment to a U.S. resident exceeds $5,000 then 15% withholding tax will apply.
Resources
Where service is rendered outside of Canada
Non-resident individuals receiving payment for non-employment services rendered outside of Canada are not subject to any tax withholdings and no year-end slip is issued.
Procedure for non-resident payments (non-employment)
-
Complete
a Casual/Additional
Pay
Request
(PDF)
form.
- The individual’s mailing address must be included to ensure timely payment and receipt of any required tax slips.
- Gender and birthdate are required in order to set the individual up for payment.
- If the individual provides an Individual Tax Number or Foreign Social Security Number include this information in the Social Insurance Number field.
- In the Description of Work field also indicate whether the work was performed inside or outside of Canada. If the work was performed inside Canada, please indicate the number of days the individual was in Canada (an additional page can be attached if required).
- In the Gross Amount field also indicate the currency in which the payment is to be made (i.e. $1,000 U.S.; 1,000 E.U.).
- If Research Accounts in fund 105 are being charged a Research Financial Compliance & Eligibility Stamp is required.
- Where payment is not in Canadian or U.S. funds, complete and attach an Foreign Fund Request Form (PDF), available on the Finance website. (Payment in Canadian or U.S. funds can only be made by cheque, not by wire transfer.)
- Attach any additional supporting documentation related to the payment.
- Submit the documentation to payroll.