When does my client have to withhold Regulation 105 tax on fees paid to a non resident for services in Canada?
As of October 2026, Regulation 105 makes any payer withhold 15% of fees, commissions and other amounts paid to a non resident for services performed in Canada, other than employment income. Remit it by the 15th of the next month and report it on a T4A-NR. Quebec adds its own 9%. Only a CRA waiver letter lowers the 15%.
Which payments to a non resident take the 15%?
Regulation 105(1) says a payer of a fee, commission or other amount to a non resident for services rendered in Canada withholds 15% of the payment laws-lois.justice.gc.ca. The authority sits in paragraph 153(1)(g) of the Income Tax Act, which covers fees, commissions or other amounts for services
laws-lois.justice.gc.ca. Every payer is caught, including a non resident payer, and the 15% applies to the gross amount
canada.ca.
| Payment to the non resident | Withhold 15%? | Rule |
|---|---|---|
| Fee for consulting, engineering or similar work done in Canada | Yes | Reg 105(1) |
| Part of the fee for work done outside Canada, allocated and documented | No | IC75-6R2 para 32 |
| Same contract, no allocation documented | Withhold on the whole payment (CRA recommendation) | IC75-6R2 para 33 |
| GST/HST charged on the fee | No | IC75-6R2 para 23 |
| Meal reimbursements up to $45 and lodging up to $100 per person per day | No, and no vouchers needed | IC75-6R2 para 24 |
| Reasonable travel above those limits, vouchers kept | No | IC75-6R2 para 25 |
| Pay for travel time to and from Canada | Yes | IC75-6R2 para 14 |
| Fee a non resident contractor pays its own non resident subcontractor | Yes, the contractor withholds | IC75-6R2 para 27 |
| Salary, wages or other remuneration to an employee | No, payroll rules apply instead | Reg 105(2)(a) |
| Payment to a registered non resident insurer, or to an authorized foreign bank for its Canadian banking business | No | Reg 105(2)(b) and (c) |
The CRA reads "in respect of services rendered in Canada" broadly: the payment doesn't have to be only for services or go to the person who did the work canada.ca. Don't deduct CPP or EI from these fees
canada.ca. For non resident employees, the rules on non resident employer certification apply instead.
What does the 15% take from a $40,000 fee for work in Toronto?
Your client pays a US consulting firm $40,000 in November 2026 for 10 days of work at its Toronto office. It also reimburses $45 a day for meals, $100 a day for the hotel and a $1,200 flight backed by receipts. The firm has no waiver letter.
| Line | Amount |
|---|---|
| Fee for services in Canada | $40,000.00 |
| Meals, 10 days at $45 (no vouchers needed) | $450.00 |
| Hotel, 10 days at $100 (no vouchers needed) | $1,000.00 |
| Flight, receipts kept | $1,200.00 |
| Regulation 105 withholding, 15% of $40,000 | ($6,000.00) |
| Paid to the consultant | $36,650.00 |
| Remitted to the CRA by December 15, 2026 | $6,000.00 |
The withholding is due on or before the 15th of the month after the month the amount was paid or credited canada.ca. On the T4A-NR, box 18 shows the $40,000 fee, box 20 the $2,650 of travel expenses and box 22 the $6,000 deducted; travel stays out of box 18
canada.ca. Leave GST/HST out of both boxes
canada.ca.
The gotcha is a net contract. If the contract makes your client cover the withholding on the consultant's behalf, the CRA treats that amount as an extra payment that is itself subject to withholding, so you gross it up: 15/85 of the payment canada.ca. Here that is 15/85 of $40,000, or $7,058.82 remitted, and the T4A-NR shows $47,058.82 of income.
Quebec adds 9%, so work done there costs 24%
Revenu Québec requires a payer to withhold 9% income tax from a payment, other than regular and continuous employment, to a person (including a corporation) not resident in Canada for services performed in Quebec. The exceptions are a non resident insurer authorized under the Insurance Companies Act and an authorized foreign bank for its Canadian banking business. A monthly, twice monthly or weekly remitter sends it by the 15th of the following month; a quarterly or annual remitter keeps its usual deadline revenuquebec.ca.
Regulation 105(2) carves out no Quebec work, so the federal 15% still applies laws-lois.justice.gc.ca. Move the example above to Montreal and your client withholds $6,000 for the CRA plus $3,600 for Revenu Québec, $9,600 in all, and pays the consultant $33,050. A CRA waiver letter covers only the federal 15%.
How does a non resident get the 15% waived or reduced?
The non resident applies, not the payer, and the payer needs a CRA letter authorizing the waiver or reduction. If you don't receive one, you withhold the usual 15% canada.ca. A tax treaty alone doesn't switch it off: the CRA says Canada gives up Regulation 105 withholding only through the waiver process, not through treaties
canada.ca. The legal basis is the undue hardship rule in subsection 153(1.1)
laws-lois.justice.gc.ca.
| Route | Who qualifies | Result |
|---|---|---|
| Treaty based waiver (Form R105) | Treaty country resident with no permanent establishment in Canada that meets test A, B or C below | Withholding waived |
| Test A | Individual earning under $5,000 in Canada in the calendar year, expenses included | |
| Test B | Presence not recurring, under 180 days in Canada on the current contract | |
| Test C | Recurring presence, current contract under 180 days, under 240 days over the current year, 3 years before and 3 after | |
| Income and expense waiver (Form R105, Appendix B) | No treaty, or a treaty waiver refused, and estimated tax under 15% of the gross fee | Withholding reduced |
| Simplified waiver (Form R105-S) | Self employed artist or athlete earning no more than $15,000 in Canada in the calendar year | US resident: no withholding; other countries: 23% of net income |
The tests come from the CRA's treaty based waiver guidelines canada.ca, the income and expense route from its R105 instructions
canada.ca, and the R105-S rules from the simplified process page, which also tells the payer to keep the original form for six years
canada.ca. Send the application at least 30 days before the services start or 30 days before the first payment
canada.ca. Any outstanding Canadian tax has to be settled first, and a waiver doesn't cover the non resident's own withholding on its subcontractors or employees
canada.ca. Get the current form from the CRA's R105 page
canada.ca.
As of October 2026, the CRA says it will make the waiver process simpler starting in late spring 2026, introducing the changes gradually after a consultation that ran June 30 to August 29, 2025 canada.ca. It has made no commitment to waivers that reach back to payments already made.
What happens if your client skips the withholding?
A payer who fails to withhold and remit is held liable for the whole amount, plus interest and penalties canada.ca. In the example, that is the $6,000 the consultant never had taken off, owed by your client.
| Failure | Penalty |
|---|---|
| Not withholding | 10% of the tax that should have been deducted |
| Second or later failure to withhold, knowingly or with gross negligence | 20% |
| Remitting 1 to 3 days late | 3% |
| Remitting 4 or 5 days late | 5% |
| Remitting 6 or 7 days late | 7% |
| Remitting more than 7 days late, or not at all | 10% |
Those rates come from the CRA's T4A-NR guide, and the late remitting penalties generally apply only to the part over $500 unless the failure was knowing or grossly negligent canada.ca. Watch subcontractor fees reimbursed to a non resident: the CRA's revised interpretation confirms that when they relate to services performed in Canada, they fall under Regulation 105 withholding
canada.ca.
How is the 15% reported and recovered?
Issue a T4A-NR slip whatever the amount paid or withheld, and file it with a T4A-NR Summary by the last day of February after the year of payment, with the recipient's copy due the same day canada.ca. For 2026 payments that is February 28, 2027, a Sunday, and a return received or postmarked by the next business day is on time, so Monday, March 1 works
canada.ca. More than 5 slips must be filed electronically, and box 23 shows code 1 for a CRA waiver or reduction and code 2 for an R105-S arrangement
canada.ca. The T4A deadline page has the late filing penalties.
The 15% isn't a final tax. It's a payment on account of the non resident's Canadian tax, and the non resident gets it back, in whole or in part, by filing: an individual by April 30 (June 15 when carrying on business in Canada), a corporation within six months after its year end, attaching copy 3 of the T4A-NR canada.ca. That return is where a treaty exemption on business profits is claimed. See the non resident corporation T2 and the non resident individual return.
Sources
Does Regulation 105 apply to work a non resident does entirely from outside Canada?
No. Payments, or the part of a payment, for services performed outside Canada aren't subject to Regulation 105 withholding, but document the split, since without it the CRA recommends withholding on the whole payment canada.ca.
Is a T4A-NR still needed when a waiver cut the withholding to zero?
Does a waiver mean the non resident skips the Canadian return?
No. A waiver or reduction doesn't remove the non resident's requirement to file a Canadian income tax return canada.ca.
Does a non resident payer have to withhold too?
Yes. Every payer, resident or non resident, is responsible for Regulation 105 withholding, so a foreign contractor paying its own non resident subcontractor for work in Canada withholds 15% from that fee canada.ca.
General information for the tax year shown, not advice for a specific client. Confirm the facts before you file or remit.