CRA maintains global grasping of employee source deductions

CRA has confirmed that a US (or other non-resident) employer is required to withhold and remit Canadian source deductions from the remuneration paid by it to its Canadian-resident employees, even if it does not carry on business in Canada directly or indirectly, the employees work only in the US and their remuneration is subject to full US source deductions.

Although the literal scope of the Regulations in question is consistent with this position (clarifying an earlier position), it appears to be oblivious to a principle of statutory interpretation (see Territorial Limits) that generally an implication should be read into a taxing provision that it does not apply to a taxpayer (in this case, a US corporation) which has no connection to the jurisdiction imposing the tax (or, in this case, a source deduction obligation.)

Neal Armstrong.  A summary of Memorandum 2012-0436311I7 appears under Regulation 102.