2 September 1992 Income Tax Severed Letter 9200985 - Non-resident Information Returns

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.

• 5- 920098 Olli Laurikainen (613)957-2116 24(1) Attention: 19(1) September 2, 1992

Dear Sirs:

Re: Information Returns

This is in reply to your letter dated January 6, 1992 wherein you inquired about information returns that are required under the Canadian Income Tax Act (the "Act") to be filed by a corporation resident in the United States in respect of commissions paid by either the company's head office in the United States or its Canadian permanent establishment to independent representatives resident in Canada or the United States.

Your letter was unclear as to whether you were inquiring about payments made to employees of the non-resident corporation or to independent contractors. Since the withholding requirements are different we will address both scenarios. In either case we have assumed that the payments are made in respect of services rendered to the non-resident corporation.

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Independent Contractors

Payments of commissions to independent contractors resident in Canada are not subject to withholding tax under the Act and no information returns are required to be filed in respect of such payments. Similar payments made to non-residents of Canada would be subject to a 15% withholding tax under section 105 of the Income Tax Regulations (the "Regulations") if such payments are made in respect of services rendered in Canada. If withholding tax is required under section 105 of the Regulations, information return T4A-NR Supplementary and Summary must be filed in respect of such payments pursuant to subsection 200(1) of the Regulations.

Where a U.S resident can demonstrate that he will not be subject to tax by virtue on an exemption in the Canada-U.S. Income Tax Convention or by an estimate of his income and expenses, the withholding otherwise required by section 105 of the Regulations may be waived. In this regard reference should be made to Information Circular 75-6R and particularly paragraphs 10 to 16 thereof which pertain to applications for a waiver or reduction of section 105 of the Regulations withholding tax.

Employees

Sections 100 and 101 of the Regulations apply equally to resident and non-resident employers. Withholdings under section 101 of the Regulations would be required from all commissions paid to Canadian resident employees and from commissions paid to non-resident employees in respect of employment exercised in Canada. The payments and withholdings must be reported on a T4 Supplementary and Summary pursuant to subsection 200(1) of the Regulations.

No amount need be deducted or withheld from a commission payment made to an employee who was neither employed nor resident in Canada unless the payment is of the type described in paragraphs 104(2)(a) or (b) of the Regulations.

The views expressed above are equally applicable to payments arising from the non-resident corporation's head office and payments made by the permanent establishment of the non- resident corporation in Canada.

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In the event you require further information on this subject, we would suggest you contact:

The International Taxation Office
875 Heron Road
Ottawa, Ont.
K1A-1A8
phone #:1-800-267-5177

We hope the above is of assistance to you.

Yours truly,

for Director
Reorganizations and Foreign Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch

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