CRA accepts that an off-shore campus of a Canadian university qualifies as a business for source deduction purposes

Reg. 104(2) provides that no source deductions are required for non-resident employees who do not perform any services in Canada except for remuneration described in s. 115(2)(e)(i) paid to former Canadian residents.  S. 115(2)(e)(i) references remuneration paid by a resident to a non-resident who is exempt from non-Canadian income tax unless inter alia it is paid "in connection with ... the rendering of services for the non-resident person’s employer ... in the ordinary course of a business carried on by the employer."

The Directorate accepted that remuneration paid to former Canadian residents by a campus of a Canadian university located in a sunny clime (where there was no local income tax) qualified for the "business" services exemption quoted above, so that no source deductions were required (although T4s were required to be issued).

Neal Armstrong.  Summary of 17 June 2008 Memo 2008-0276721I7 under Reg. 104(2).