Applications for a waiver or a reduction of withholding

The 15% withholding is not the final tax of the non-resident. Canada Revenue Agency considers the withholding to be a payment on account of the non-resident’s potential tax liability in  Canada. Generally, non-residents are required to file a Canadian income tax return to calculate their tax liability or to obtain a refund of any excess withholding amounts.

Where a non-resident can demonstrate that the withholding is more than their potential tax liability in Canada, either due to treaty protection or income and expenses, Canada Revenue Agency may waive or reduce the withholding. Non-residents who want to request a waiver or reductionof withholding have to submit a waiver application to the Canada Revenue Agency tax services office in the area where their services are to be provided. Waiver applications have to be submitted no later than 30 days before the period of service begins, or 30 days prior to the initial payment for the related services.

The non-resident must provide a letter from Canada Revenue Agency authorizing a waiver or reduction of the withholding amount. If you do not receive such a letter, you have to withhold the usual 15%.

Waiver application form: Regulation 105 Waiver Application Form

Use this form if you are a non-resident self-employed individual or corporation and want to apply for a reduced amount of Regulation 105 withholding tax from amounts paid to you for services provided in Canada.