Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: 1. Whether the Government of Canada must withhold 15 percent of the amount to be paid to a non-resident contractor in respect of services provided in Canada pursuant to paragraph 153(1)(g) of the Act and subsection 105(1) of the Regulations.
Position: 1. Yes, provided no waiver is obtained.
Reasons: 1. Paragraph 153(1)(g) of the Act requires every person paying fees, commissions or other amounts for services to withhold and remit from such payments in accordance with the rules under section 105 of the Regulations. The term "person" is broad in scope and includes individuals, trusts, and corporations, as well as the Crown, and any entity that is exempt from taxation under Part I of the Act.
XXXXXXXXXX
2014-052638
J. Ouimet
April 22, 2014
Dear XXXXXXXXXX:
Subject: Regulation 105 Government Contracts
We are writing in response to your email of April 1, 2014, requesting our views on whether the Government of Canada must withhold 15 percent of the amount to be paid to a non-resident contractor for services provided in Canada under paragraph 153(1)(g) of the Income Tax Act (the "Act") and subsection 105(1) of the Income Tax Regulations (the "Regulations").
We note that this response confirms the information provided to you by voice message on June 24, 2013, in response to a similar question that you asked previously.
This technical interpretation provides general comments about the provisions of the Income Tax Act and the Income Tax Regulations. It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advance Income Tax Rulings.
Paragraph 153(1)(g) of the Act provides, in part, that:
"Every person paying at any time in a taxation year
...
(g) fees, commissions, or other amounts for services, other than amounts described in subsection 115(2.3) or 212(5.1),
...
shall deduct or withhold from the payment the amount determined in accordance with prescribed rules..."
The prescribed rules are found in subsection 105(1) of the Regulations, which states:
"Every person paying to a non-resident person a fee, commission or other amount in respect of services rendered in Canada, of any nature whatever, shall deduct or withhold 15 per cent of such payment."
The term "person" is broad in scope and includes individuals, trusts, and corporations, as well as the Crown, and any entity that is exempt from taxation under Part I of the Act. Therefore, XXXXXXXXXX is subject to the rules in paragraph 153(1)(g) of the Act and subsection 105(1) of the Regulations for services rendered, or to be rendered, in Canada. In certain cases, pursuant to subsection 153(1.1) of the Act, the Canada Revenue Agency may grant a waiver or reduction of the withholding otherwise required by subsection 153(1).
We note that pursuant to subsection 227(8.4) of the Act, a payer who fails to deduct or withhold an amount as required by section 153 is liable for the whole amount together with any penalty and interest under subsections 227(8) and 227(8.3) of the Act, respectively.
Further information on withholding obligations under these provisions is available in our Information Circular IC 75-6R2 Required Withholding From Amounts Paid to Non-Resident Persons Performing Services in Canada.
We trust our comments will be of assistance.
Yours truly,
Terry Young, CPA, CA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2014
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2014
Email this Content