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Non-Resident Workers in Canada

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Personal Income Tax -> Non-Resident Workers in Canada

Non-Resident Workers in Canada

Non-Resident Employees

Employees in Canada who are not Canadian residents, and who are in regular and continuous employment in Canada, will be subject to the same tax deductions as Canadian residents.  These deductions include federal and provincial income tax, employment insurance premiums, and Canada or Quebec Pension Plan contributions.

Temporary workers who are neither Canadian citizens nor permanent residents are issued Social Insurance Numbers (SINs) that begin with a "9".  These SINs are valid only until the expiry date printed on the card.

Employers can use the Canada Revenue Agency (CRA) online payroll deductions calculator, as can employees who want to see what their deductions will be.  See our article on calculating payroll deductions.

Employees complete federal TD1 forms so that the employer can determine which "claim code" to use when calculating payroll deductions.  On page 2 of the federal TD1 there is a question for non-resident workers.  If as a non-resident employee, your taxable income earned in Canada will be 90% or more of your world income for the year, you can answer "yes" and claim exemptions available to you on page 1 of the TD1.  If the response to this question is "no", then no exemptions are allowed in calculating payroll deductions.  If "yes" is answered, and the total exemptions are greater than the basic personal amount, then a provincial TD1 form should also be completed.

You may recover some of the taxes paid as a non-resident employee, when filing your Canadian tax return.  If reporting only income from employment in Canada from a business that had a permanent establishment (PE) in Canada, then the tax return for the province in which the income was earned would be used, not the non-resident return.  If your taxable income earned in Canada is 90% or more of your world income for the year, then all available federal and provincial non-refundable tax credits can be claimed.  If the percentage is less than 90%, then only the following non-refundable tax credits can be claimed on the tax return, as per Schedule B:

bulletline 308 CPP contributions on employment income (from T4)
bulletline 312 EI premiums on employment income (from T4)
bulletline 316 disability amount (self)
bulletline 317 EI premiums on self-employment income and other eligible earnings
bulletline 319 interest on student loans
bulletline 323 tuition (not education and textbook amounts)
bulletline 349 donations and gifts

If your country of residence has a tax treaty with Canada, all or part of Canadian-source income may be exempt from Canadian tax.  Under some treaties, employment income is exempt if:

bulletit is less than a certain amount (e.g. $10,000 for US residents); or
bulletyou were present in Canada for 183 days or less in the year and you received it from an employer who was not a resident of Canada and who did not have a permanent establishment in Canada.

Any exempt income can be deducted on line 256 of your Canadian tax return.

CRA Resources

bulletSchedule B Allowable Amount of Non-Refundable Tax Credits - Non-Resident of Canada
bulletTax treaties
bulletIncome Tax and Benefit Package for Non-Residents and Deemed Residents of Canada (includes T5013 Guide)
bulletT4058 Non-Residents and Income Tax

Non-Resident Service Providers

Income Tax Act s. 153(1)(g), Regulations s. 105

If a non-resident individual, partnership, or corporation is providing services rendered in Canada, and these services are not performed in the ordinary course of office or employment, any payment made for the services is subject to a 15% withholding tax, except for non-resident actors (see below) and individuals to whom the Canada-US Tax Convention applies.  Article XVII (1) of the Canada-US Tax Convention limits the rate of withholding tax to 10% on the first $5,000 (in $Canadian) paid to an individual (not a corporation) by each payer in the calendar year, as remuneration for the performance of services.

Most businesses operating in Canada are required to register for a Business Number (BN).  

CRA Resources:
bulletRC2 The Business Number and Your Canada Revenue Agency Program Accounts
bulletT4061 - NR4 - Non-Resident Tax Withholding, Remitting, and Reporting
bulletInformation Circular 75-6, Required Withholding From Amounts Paid to Non-Residents Providing Services in Canada.

Non-Resident Actors

Non-resident actors are subject to a withholding tax of 23% on their gross income earned from acting in a film or video production, including residuals and contingent compensation, with no deductions permitted.  Filing of a Canadian tax return is not necessary, but an actor can elect under s. 216.1 to file a return, and pay tax on their net income as calculated on the tax return, possibly recovering some or all of the 23% withholding tax.

CRA Resources:
bulletActors - Election to File a Return
bulletElecting under s. 216.1

Revised: January 05, 2017

 

 

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