Filing for a “Regulation 105 Waiver” 

If you’re a non-resident offering services in Canada, you might be familiar with the 15% withholding tax. However, there’s a way to decrease or even nullify this tax by applying for the ‘Regulation 105 Waiver’. 

Who is it for? This waiver isn’t just for individuals. While self-employed professionals like consultants, athletes, and artists often apply, entities such as corporations, LLCs, partnerships, and joint ventures are also eligible. 

When can you file for this waiver? There are two primary scenarios: 

• Treaty-Based Waiver: This is the more common route. Applicants request relief under regulation 105, citing the lack of a fixed or permanent establishment in Canada. To be granted this waiver, three specific criteria related to the contract’s duration, the income generated, and other factors must be met. 

• Income and Expense-Based Waivers: If a non-resident doesn’t qualify for the treaty-based waiver, they can still seek a tax reduction under regulation 105. This involves presenting an estimated income and expense statement from the contract. If the projected tax due is below 15%, the non-resident stands to gain. 

For both scenarios, it’s essential to provide supporting documents with the waiver application. Submit the application to the CRA office nearest to where the services are being rendered. The waiver processing might take up to a month, so it’s advisable to file at least 30 days before your first payment or before you begin offering services in Canada. 

Remember, even if you file the waiver later, the reduced tax rate will only be effective once the waiver gets approved. And this waiver application doesn’t negate the need to file a tax return. If you’re a non-resident providing services in Canada, ensure you request a T4A-NR slip from your client. This document will detail the taxes deducted and the total amount paid to you annually. 

Key Takeaway: If you’re a non-resident planning to offer services in Canada, consider applying for a regulation 105 waiver to potentially reduce your tax burden.