Section 153

Subsection 153(1) - Withholding

Administrative Policy

18 March 2008 External T.I. 2008-0265861E5 F - Programme d'aide financière d'urgence ("PAFU")

no source deductions from social assistance payments

CRA noted, regarding the Quebec PAFU [Emergency Financial Assistance Program] that the Ministry of Employment and Social Solidarity was not required to effect source deductions therefrom because they did not come within s. 153.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(u) s. 56(1)(u) applied to emergency assistance not based on an income test 173
Tax Topics - Statutory Interpretation - French and English Version English version of s. 56(1)(u), as the broader of the two, was to be preferred 59

Paragraph 153(1)(a)


Canada c. Roll, 2001 DTC 5055 (FCA)

payroll disbursements made only as agent

Given that he had made payments of remuneration to employees as a bare trustee for the corporation and the taxpayer, who was an employee of a corporation in financial difficulty, was persuaded by the president to receive deposits of the net payroll obligations of the corporation to his own bank account and to then disburse those amounts to the employees and that the decision to make payments of the net salaries of the employees was that of the principals of the corporation alone, it followed that the taxpayer was not within the scope of s. 153(1), 153(1.3) or 227(5).

Cana Construction Co. Ltd. v. The Queen, 96 DTC 6370 (FCA)

The Court found no manifest error in the Tax Court's finding that the appellant had undertaken to pay employees of its subcontractor and withhold and remit applicable source deductions including income tax.

Mollenhauer Ltd. v. The Queen, 92 DTC 6398 (FCTD)

non-employers may be liable

When a subcontractor of the plaintiff ("Aprok") was unable to meet its payroll, Aprok arranged with the plaintiff, which was indebted to Aprok, to pay the net amounts owing to Aprok's employees. The plaintiff paid their salaries but made no source deductions. The Minister assessed the plaintiff under ss. 227(8) and (9) for failure to withhold and remit source deductions as required by s. 153(1).

In rejecting the plaintiff's submission that there was never any employee/employer relationship and the payments were not made by it as wages, and in holding that an employee does not have to be performing services as an employer of the payer in order to trigger the payer's obligation to withhold, Teitelbaum J. stated (at p. 6401):

"It is very clear that s. 153(1) of the Act does not speak of whether persons doing the paying are employers or not. I am satisfied that if a person or company is paying 'salary or wages or other remuneration' it must deduct or withhold the required amount pursuant to the Income Tax Act."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 227 - Subsection 227(9) 81

The Queen v. Coopers & Lybrand Ltd., 80 DTC 6281, [1980] CTC 367 (FCA)

payroll not paid by receiver as agent of debtor

The payment by a privately-appointed receiver-manager of the unpaid wages of the employees of the debtor company (1) was the payment of "salary or wages" (as opposed to "gratuitous benefactions made in order to earn and preserve the good-will of the persons who had been employees of" the debtor company, as was contended by the receiver-manager) and (2) was made by the receiver-manager on its own decision, and not by the debtor company (notwithstanding that the debenture stated that the "receiver shall for all purposes be deemed to be the agent of the Company".)

Dauphin Plains Credit Union Ltd. v. Xyloid Industries Ltd., 80 DTC 6123, [1980] CTC 247, [1980] 1 S.C.R. 1182

receiver-manager included

A receiver-manager of a company who pays unpaid wages to the company's employees comes within the words "every person paying salary or wages."

R. v. O'Dare, 79 DTC 5243, [1979] CTC 409 (B.C. Co. Ct.)

establishes trust

"[I]f Section 153 does not explicitly impress monies deducted pursuant to it with a trust, it does so by necessary implication."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 238 - Subsection 238(2) 81

See Also

Dare Human Resources Corporation v. Ontario (Revenue), 2019 ONCA 549

payor of remuneration was the employer

Two Ottawa placement agencies supplied temporary workers to the Public Service of Canada and federal agencies. When these clients put out a call for temporary workers, the agencies identified appropriately qualified and willing candidates from their inventory, and negotiated an hourly rate of pay for the placement that exceeded what they paid to the workers.

The agencies’ primary function during the assignment was to provide the payroll on the basis of time sheets signed off by the client, whereas the client managed and directed the workers. However, both dealt with performance and discipline issues.

In dismissing the agencies’ appeal of a decision of Hackland J that they were liable for Ontario employer health tax on the basis that they were the workers’ employers, the Court stated that Hackland J had appropriately taken into account “that the appellants are the only parties with contractual relationships with the workers and that the contractual documentation with the Government of Canada makes it clear that it was the government’s intention that the workers be the employees of the placement agencies” (para.15).

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 100 - Subsection 100(1) - Employer placement agencies were the workers’ employer 298

Marshall v. The Queen, 2012 DTC 1068 [at 2815], 2012 TCC 21

not liable for amounts paid as agent

The taxpayer was the sole shareholder and director of Internorth Limited ("IL") and a majority shareholder and director of Internorth Construction Company ("ICC"). ICC ran a construction business, and IL was incorporated to manage ICC. The minister assessed the taxpayer for unremitted source deductions in respect of salaries and wages paid to ICC employees. However, the taxpayer was able to establish that IL was only paying those amounts as an agent of ICC, and in fact IL had no employees at all. Because the taxpayer was assessed only in his capacity as a director of IL, and the obligation to remit source deductions lay with ICC, the taxpayer's appeal was granted.

Webb J. also specifically noted (at para. 25) that a director in a director's liability case is able to challenge the correctness of the assessment giving rise to the liability in issue.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Onus 181

Central Springs Limited v. The Queen, 2010 DTC 1258 [at 4409], 2010 TCC 543 (Informal Procedure)

no responsibility for source deduction arreas when took on payment responsibility

The taxpayer and Humbly Enterprises were related corporations. When Humbly was experiencing financial difficulties and was in arrears for source deduction remittances, the taxpayer commenced paying the remuneration of Humbly's employees and took on their services. It was only at that point, Boyle J. found, that the individuals in question became employees of the taxpayer. Therefore, the taxpayer could not be liable for Humbly's source deduction arrears - Boyle J. characterized CRA's contrary position as "inappropriate retroactive collection planning." Absent a sham, the CRA has no right to redetermine a legal employment relationship.

Marché Lambert et Frères Inc. c. La Reine, 2008 DTC 3815, 2007 TCC 466

decision maker has the liability

In response to a submission of the taxpayer that the taxpayer's payroll service provider ("Paie Maître"), and not the taxpayer itself, was liable for failure to remit source deductions, Paris J. stated (at para. 18) that "the relevant case law of the Federal Court of Appeal shows that a person is only liable under that subsection [s.153(1)] if it had decision-making powers over the payments to employees" and went on to find that here, Paie Maître was at all times subject to the instructions of the taxpayer and an affiliated company. He stated (at para. 40):

"It does not matter whether the contractual relationship between the Appellant and Paie Maître was a mandate or a trust, what matters is the control of the Appellant maintained over the funds that were in the hands of Paie Maître."

The taxpayer was found to have paid wages to its employees within the meaning of s. 153(1), with the result that it was liable under s. 227(9.4) to pay the amounts withheld from the wages but not remitted to the Receiver General.

Suspended Power Lift Service Inc. v. The Queen, 2007 DTC 1505, 2007 TCC 519 (Informal Procedure)

withholding triggers remittance obligation

Webb J. found that where an amount has been deducted from compensation as income tax source deductions or employee premiums under the Canada Pension Plan Act, that amount must be remitted by the person so withholding from the compensation even if, in fact, the compensation was earned by someone who properly characterized was an independent contractor rather than an employee.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1) 64

McLeod Masonry (1979) Ltd. v. The Queen, 2000 DTC 2238 (TCC)

must remit withholding even if an overpayment

Lamarre Proulx found (at p. 2243) that even if evidence, that a portion of the remuneration paid to employees of the taxpayer represented fraudulent overpayments attributable to overstatements of overtime, were accepted, this did not provide an excuse for the taxpayer to fail to remit amounts which it had shown as being deducted in respect of such alleged overpayment:

"Once the deduction has been made, it has to be withheld. It is trust money, it then has to be remitted to the Receiver General."

Manke v. The Queen, 98 DTC 1969 (TCC)

liability even if full gross pay not paid

In finding that the taxpayer was entitled to credits for amounts allegedly withheld but not remitted, McArthur TCJ. stated (at p. 1974):

"It does not appear that the employer ever made an actual physical withholding of source deductions, however, all that the law requires is a failure to pay for wages on account of the withholding of source deductions, and not the actual placing of the money into someone's pockets."

The Queen v. Ursel Constructors Ltd., 96 DTC 1496 (TCC)

no employee credit if no withholding

There was no evidence that any withholdings had been made by the corporate taxpayer to individual employees: no segregated payroll accounts were established for the individual showing paid deductions, no pay slips were provided to them and no cheque stubs were attached to their pay cheques. Accordingly, the individuals were not entitled to credit for source deductions in their individual returns.

Laxton v. MNR, 89 D.T.C. 629 (TCC)

GP responsible for LP source deductions

The taxpayer were the director of a corporation (the "Corporation") which was the general partner of a limited partnership, and he also was a limited partner. In 1984, when the limited partnership business was not going well, the limited partners advance moneys with instructions that only the net wages of employees were to be paid. He was assessed under s. 227.1 following the bankruptcy of the limited partnership and the Corporation,

In rejecting a submission that it was not limited partnership and not the Corporation who was the payor of the wages of the limited partnership employees, so that the Corporation itself was not responsible for withholding, and so that the directors were not liable, Lamarre Proulx TCJ found that, as general partner, the Corporation had the powers and duties to manage, control, and administer and operate the business and affairs of the limited partnership and that "the Corporation did in effect carry on these managerial duties" (p. 632). Accordingly, the Corporation was the payor of the salaries and wages of the employees and was obligated by s. 153(1) to withhold and remit the source deductions. Furthermore, the provisions of s. 227.1(1) of applied to the directors so that (as the taxpayer did not submit a due diligence defence) he was liable.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 227.1 - Subsection 227.1(1) GP responsible for LP source deductions 207

Lalonde, 82 DTC 1772, [1982] CTC 2749 (T.R.B.)

The taxpayer's employer paid less than the full wages owing to the taxpayer after assuring him that the difference represented source deductions, but did not remit the source deductions to the Receiver General or issue a T4 to the taxpayer. Mr. Tremblay held that because under s. 153 the employer acted as agent of the Minister in withholding the appropriate tax at source, and as the Minister was responsible for his agent, the Minister could not require the taxpayer to pay tax already deducted by the Minister's agent.

Clark v. Oceanic Contractors Inc., [1982] BTC 417, [1983] 1 All E.R. 133 (HL)

carrying on trade was sufficient connection to jurisdiction

nS.204(1) of the Income and Corporation Taxes Act 1970 stated baldly that "income tax shall ... be deducted or repaid by the person making payment" without (like s. 153(1) of the Canadian Act) stating explicitly that the payor, to be subject to this withholding obligation, must be a resident of or carrying on business in the jurisdiction. An argument was rejected that this provision, regarding collection of tax by deduction from wages, could never have been intended to apply to a foreign company, non-resident in the United Kingdom, which made payments outside the United Kingdom. It was sufficient that the payor carried on a trade in the United Kingdom to make it subject to the provision.

Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Territorial Limits presumption against application to non-subjects 53

Administrative Policy

2020 IFA-YIN Seminar on COVID-19 Guidelines, Q.3 and Q.4

no dispensation from source deductions for non-resident employers whose employees work from Canada due to COVID travel restrictions

If an individual is not ordinarily resident in Canada, but is in Canada due to Travel Restrictions or otherwise due to public safety concerns relating to COVID-19, and works remotely (for their non-resident employer) from Canada, would the employer, if it has no Canadian ties, now be subject to withholding obligations in Canada – including in the situation where it did not consent to this Canadian nexus?

CRA indicated that the Canadian income tax rules require that amounts must be deducted or withheld or remitted in respect of remuneration paid to a non-resident officer or employee in respect of services of an office or employment provided in Canada, although it may be possible to obtain a waiver from withholding if there is an income tax treaty with the employee’s country of residence. In this context, CRA would seek to be flexible when withholding problems were encountered, as extraordinary circumstances can make compliance difficult.

25 February 2016 CBA Roundtable, Q. 7

joint responsibility of joint employers

A group of professionals (e.g., dentists), each operating as sole proprietors, hire common staff members (e.g., receptionists, file clerks, etc.) Can the professional who is acting as agent in employing the staff make all payroll remittances under the professional's own Payroll account, without jeopardizing the status of the other professionals as employing the staff as employer, i.e., does CRA require each of the principal employers to remit payroll amounts under their own Payroll accounts in order that no GST/HST be exigible on the services provided by the staff members? CRA responded:

…Both common law and civil law’s approach to partnership require an element that relates to profit sharing.

[Here] the professionals.. agree to share certain expenses but do not operate as a partnership as they do not carry on a business in common with a view to sharing profits; rather, they only share expenses. They jointly hire a group of employees who will work for each of the professionals. Each professional is an employer at law; however, there is an agreement that one of them will act as an agent of the others in regards to the employment expenses. It is understood that the support staff is hired under a contract of service and not under a contract for services (that is, it is an employment contract).

[T]he actual employer… is the group of dentists who all came together and hired the support staff. That group of dentists, that association or as what is referred to as a non-trading or non-commercial partnership, or a partnership of employment or occupation, is the actual employer. The dentists are jointly responsible for any source deductions required from the remuneration paid to the employees. The group of dentists could open a Business Number (BN) payroll account for payroll purposes and remit and report under that BN.

It is also possible for one of the members to act on behalf of the group of dentists and to pay, deduct, remit and report the wages of the support staff under its own BN. Once again, the dentists would be jointly responsible for any source deductions…..

When a person pays the salary or wages of an employee employed in pensionable and/or insurable employment, that person who paid is deemed to be the employer in addition to the actual employer. The deemed employer is then required under both the Canada Pension Plan…and the Employment Insurance Act…to pay, deduct, remit and report as if he were the actual employer. These deeming provisions do not negate the fact that the dentists are the actual employers.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 arrangement for sharing employees not a partnership in Quebec or ROC/profit-sharing arrangement required 234
Tax Topics - General Concepts - Agency dentist handles source deductions and payroll as agent for colleagues 127
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Service dentists jointly employ staff so as to avoid GST 296
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Taxable Supply dentists jointly employ staff so as to avoid GST 203

4 December 2014 Internal T.I. 2014-0531251I7 - Directors' Liability

GP generally liable for source deduction failures of LP

A limited partnership, which shortly will be declared bankrupt, failed to remit source deductions. Would the general partner, which is a corporation, be liable for the unremitted source deductions?

After discussing Laxton, the Directorate stated:

[T]he corporation, as the general partner, has the power to manage, control, administer and operate the business and affairs of the limited partnership. Accordingly… the corporation is the payor of the amount and must meet the requirements of subsection 153(1)… .

See summary under s. 227.1(1).

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 323 - Subsection 323(3) directors of GP potentially liable for GST remittance failures of LP 136
Tax Topics - Income Tax Act - Section 227.1 - Subsection 227.1(1) directors of GP potentially liable for source deduction and GST remittance failures of LP 137

6 November 2014 External T.I. 2014-0530991E5 - Liability for the failure to withhold

no employer liability for undeducted income tax/penalty liability of unincorporated managing members

A corporation failed to withhold the required amounts based on taxable benefits received by Canadian employees. Is it or its directors liable for the amount that should have been withheld? What if it instead is an unincorporated association? CRA responded:

…The payor is not required to pay the amount of income tax that should have been withheld provided that the employee is resident in Canada. However, where the particular employee is a non-resident of Canada…subsection 227(8.4) provides that the employer is liable for the whole amount that should have been deducted or withheld, along with any penalties and interest.

… [W]here the payor failed to remit amounts withheld or deducted, the payor…is liable for the amount of the deductions that were not remitted together with the penalty for not remitting, and interest thereon.

…[W]here the corporation failed to make the required withholding of tax with respect to an employee who is a resident of Canada, the corporation and its directors…are liable only to penalties [under ss. 227(8) and 227(8.3)] and interest… .

[W]here an association has failed to deduct or withhold an amount[,] or deducted, but failed to remit the amounts, the members of the association who have the power to provide overall management of the association may be liable for the tax, along with any penalties and interest as described above.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 227 - Subsection 227(8.4) no employer liability for undeducted income tax 89

2 October 2014 External T.I. 2013-0508651E5 - Services provided by non-residents

potential employment arrangement with supplier's employees

Is a taxpayer (CanCo), who hires a USCo to provide services and equipment in Canada of its employees in Canada, liable for source deductions for the remuneration paid to the employees of USCo? CRA stated:

[I]in some situations, such as the one that you describe, it may not be clear who is the payer of the remuneration. These situations, where an employee is temporarily assigned from an entity in one country to an entity in another country, are addressed in paragraphs 35 to 39 of the Information Circular [IC-75-6R2].

Where the facts indicate that an employer/employee relationship exists between CanCo and the Employees, CanCo could be considered to be the Payer, even if the Employees remain on the payroll of USCo. …

26 September 2014 External T.I. 2014-0531441E5 - Unfunded LTD plan payment to non-resident employee

employee long-term disability payments: remuneration under ITA; pension under Cda-U.S. Convention

A Canadian resident employee, after qualifying for benefits under the unfunded long term disability plan ("LTD Plan") of the Canadian resident employer, becomes a resident of the U.S. Under the terms of the Plan, the employee is not required to fulfill any duties of employment and will continue to receive benefits until the earlier of rehabilitation and commencement of benefits under the employer pension plan. Would Part XIII withholding apply? CRA stated:

[T]he LTD Plan payments would be salary, wages or other remuneration…because they would be amounts arising out of the employment relationship. … As such, the amount of LTD Plan payments that would be taxable as income earned by a non-resident employee would be determined in accordance with subsection 115(2) and withholdings under Part XIII would not be applicable… [and] the LTD Plan payments would be subject to withholding under paragraph 153(1)(a)… .

CRA went on to note that as Art. XVIII, para. 3 of the Canada-U.S. Convention defines "pensions" to include any payment under a disability plan "a U.S. resident employee receiving LTD Plan payments could file a Canadian income tax return in order to obtain a refund of any withholdings made in excess of the 15% amount specified in paragraph 2 of Article XVIII."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 115 - Subsection 115(2) - Paragraph 115(2)(c) employee long-term disability payments: remuneration under ITA; pension under Cda-U.S. Convention 214
Tax Topics - Treaties - Income Tax Conventions - Article 18 employee long-term disability payments: remuneration under ITA; pension under Cda-U.S. Convention 259

20 December 2013 External T.I. 2013-0505471E5 - Director's Fees

professional council directorship fees received qua individual

Were fees received by members of a council of a professional college, who also had professional corporations, subject to withholding? Before indicating that "unless the individual receiving the fees is doing so on behalf of the corporation and not in a personal capacity, the payor is required to withhold and remit income tax and report the amounts on a T4 slip," CRA indicated that the individuals were able to serve because they "are registered to practice the profession" and "are usually elected or otherwise appointed to council… by the professional association." Accordingly, each individual received the "fees in his or her capacity as an individual," so that their fees were subject to withholding.

14 November 2013 External T.I. 2013-0500641E5 - Subsections 7(6) and 153(1) - Withholding

employer rather than s. 7(6) trust withholds

Under an arrangement described in s. 7(6), does obligation to withhold tax rests with the corporation/employer or the s. 7(6) trust? CRA stated:

[T]he arrangement is deemed to be a section 7 agreement to issue shares. Accordingly…the corporation is paying the section 7 employment benefit as remuneration for purposes of paragraph 153(1)(a) and therefore, the corporation has the obligation to withhold and remit the appropriate amount of tax.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 7 - Subsection 7(6) employer rather than s. 7(6) trust withholds 197

6 July 2012 Internal T.I. 2012-0440741I7 - stock option benefit derived by US resident

employer reimburser of stock option benefit amount subject to withholding obligation

USCo, which is a qualifying person for purposes of the Canada-US Income Tax Convention and is a wholly-owned subsidiary of a Canadian public company, employed a US-resident individual who performed employment duties for USCo in Canada for 55, 100 and 75 days in 2009, 2010 and 2011, respectively. On January 1, 2009, the US employee was granted stock options by Canco in consideration for his duties of employment performed for USCo and, following the exercise of the options on December 31, 2010, USCo paid Canco a sum equal to the in-the-money value of the options at the time of such exercise ($20,000).

After noting that the stock option benefit would be exempt from Canadian tax under the exemption in para. 2 of Article XV of the Canada-US Convention, CRA asserted that this did not relieve USCo of its source deduction obligations:

The corporation that has agreed to sell or issue the shares to the employee (in this case, Canco) will be considered to be the "payer" of the stock option benefit for purposes of paragraph 153(1)(a) (and will be responsible for the normal withholding), unless it receives reimbursement, in whole or in part, either directly or indirectly, in respect of the benefit. Since, in this case, Canco is reimbursed by USCo for the amount of the benefit conferred on the US Employee, it is our view that USCo is in substance making the actual payment and therefore is required to make the withholdings required under paragraph 153(1)(a) in respect of the remuneration paid to the US Employee for services rendered in Canada....Pursuant to subsection 153(1.1), ...CRA... may grant a waiver from withholding if a non-resident employee can provide evidence that the payments will be exempt from Canadian tax under the Treaty....[W]here the US Employee has not obtained a waiver..., USCo (as the employer) will be liable for the amount of tax that should have been withheld from the stock option benefit realized by the US Employee.... Where USCo has failed to withhold... such a failure would generally give rise to an assessment of a penalty and interest under subsections 227(8).. and 227(8.3)....

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 115 - Subsection 115(1) - Paragraph 115(1)(a) - Subparagraph 115(1)(a)(i) 195
Tax Topics - Treaties - Income Tax Conventions - Article 15 U.S. subs qualifies as payer of (therefore exempt) stock option benefit/domestic v. Treaty method 404

15 June 2011 Internal T.I. 2011-0405501I7 F - Withholding - stock option benefits

withholding obligation extends to stock option benefits

The employer's withholding obligations apply even where the employee's only remuneration is in the form of benefits.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 153 - Subsection 153(1.1) it is up to employer to find a solution for need to withhold from s. 7 benefits 184

3 November 2010 Internal T.I. 2010-0383561I7 - Payroll withholdings by non-resident employer

A US-resident corporation which employs a Canadian-resident individual whose services are performed solely in the US nonetheless is required to withhold source deductions from the wages paid to the employee.

18 July 2007 External T.I. 2007-0242081E5 - Payroll Withholdings by Non-Resident Employer

In response to a question as to whether a company resident in the U.S. is required to obtain a payroll number and withhold payroll deductions from the wages it pays to an employee who is a Canadian-resident and renders his services to the U.S. company partially in Canada and partially in the U.S., CRA stated that an employer is required to deduct withholdings at source from the salary it pays to an employee who is a resident of Canada, regardless of where the services are rendered, but went on to note that the individual may be able to obtain a "letter of authority" from CRA to authorize the U.S. employer to reduce the deductions at source to take into account any available foreign tax credit.

8 February 2005 Interpretation Case No. 52141

stock options valued based on in-the-money value

Respecting the issuance of stock options to an independent contractor as additional compensation for services rendered, CRA stated:

[W]here a person receives a stock option enabling the person to purchase shares for an amount less than the fair market value of the shares as part of the compensation paid to him or her by the corporation for taxable services provided (or to be provided) to the corporation, the CRA will consider the difference between the purchase price of the shares under the option and the fair market value of the shares at the time of the granting of the option to be additional consideration for the contractor's services to the corporation.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (d) subsequent exercise of stock option by independent contractor entailed exchange of financial services 103
Tax Topics - General Concepts - Fair Market Value - Options in-the-money stock option valuation 41

10 January 2001 External T.I. 2000-0056135 - REPORTING TAXABLE BENEFITS

agent may fulfill employer's source deduction obligations

The government of Canada retains a third party services provider (the "Agent") to provide relocation services to government employeees on its behalf, as well as payroll reporting compliance, and funds the Agent for all reimbursement or other payments made by the Agent to the relocated employees (some of which give rise to taxable benefits). CRA stated:

any taxable benefit conferred on a GOC employee by the Agent should be reported on a T4 slip. Such a benefit is in effect being conferred by the GOC on its employees through its Agent. For the same reason, the obligation to withhold and remit income tax (and other applicable withholdings) on the taxable relocation benefits on a timely basis would be with the GOC. However, the GOC may engage the Agent or any other agent to fulfil its withholding and reporting obligations.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Agency source deductions made by agent on employer's behalf 48

28 May 1997 External T.I. 9710705 - PAYROLL DEDUCTIONS AND TIPS

"Where the restaurant patron settles his bills with a major credit card and includes an amount as gratuity on the card or where the restaurant owner bills the patron for the cost of the food and beverage and includes 15% gratuity for the staff, the requirements of subsection 153(1) of the Act are met."

1995 Tax Executives Institute Round Table, Q. 5 (5M08860E)

No withholding is required on employer contributions to an EPSP and on distributions from an EPSP to the employee.

1 September 1994 External T.I. 9420255 - EPSP -OBLIGATIONS TO WITHHOLD TAX

No withholding is required where an employer makes a contribution to an employee profit sharing plan.


Where an employee who is laid off but wants to retain rights to be recalled requests that amounts that otherwise would be paid to him as severance pay and/or termination pay be held by the Director of the Employment Standards Branch, no withholding should be made by the employer with respect to those payments. However, when amounts are paid by the Employment Standards Branch to the employee, RC would expect that the applicable withholdings would be made at that time by the Branch.

4 February 1993 Memorandum (Tax Window, No. 29, p.18, ¶2425)

Payments made by an employer to an employee profit sharing plan as defined in s. 144(1) are "salary or wages or other remuneration" and, therefore, are subject to withholding.

28 January 1993 T.I. (Tax Window, No. 28, p. 9, ¶2403)

A Canadian-resident loan-out corporation will be required to make deductions at source on any salaries paid to the artist-employee even though the salary pertains to services rendered outside of Canada that may be taxable in the country where the services are rendered.

3 October 1991 T.I. (Tax Window, No. 10, p. 23, ¶1494)

S.153(1)(a) refers to every person who has employees in Canada irrespective whether the person carries on business in Canada.


Gergely Hegedus, Keith Hennel, "Employer Source Deductions: No Ordinary Tax Debts", Canadian Tax Focus, Vol. 9, No. 4, November 2019, p.5

Minister cannot assess for failure not to withhold (p. 5)

The minister may assess employers for failing to deduct or withhold and remit source deductions for EI premiums under section 85 (1) of the EI Act, and for CPP contributions under section 22(1) of the CPP. However, the minister cannot assess an employer for source deductions for income tax if the taxpayer fails to withhold income tax (MacLeod v. The Queen, [1999] 4 CTC 2223 (TCC)). The minister can assess a taxpayer for source deductions for income tax only if the employer actually withholds the income tax at source (Suspended Power Lift Service Inc. v. The Queen, 2007 TCC 519)….

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 167 - Subsection 167(5) 106

Paragraph 153(1)(j)

Administrative Policy

7 October 2011 Roundtable, 2011-0408251C6 F - REER, règle d'attribution, retenues à la source

application of s. 153(1)(j) not affected by application of s. 146(8.3)

The taxpayer in Charrier v. Quebec (2010 EXP-2783) contributed $5,970 to his spouse's RRSP in 2005, which he deducted, and a year later the amount was withdrawn. The financial institution made the applicable source deductions and remitted the balance to the taxpayer's spouse. Later in the year, the spouses separated. Under the s. 146(8.3) attribution rule, the taxpayer was taxed on the amount of the withdrawal because they were not living separate and apart at the time of withdrawal. However, it was for his ex-spouse that the taxes were withheld at source. The Court of Quebec ruled in favor of the contributor in a decision animated more by considerations of fairness than by an analysis of the legislative provisions.

Does the tax treatment indicated above of withholding tax reflect the federal tax provisions? CRA responded:

Paragraph 153(1)(j) provides that any person paying a payment out of or under an RRSP must deduct or withhold from the payment the amount determined in accordance with the prescribed rules and must remit that amount to the Receiver General on account of the payee’s tax. In the situation described, the deductions are therefore made from the lump sum payment and designated as being for the account of the person receiving the amount, being the RRSP annuitant. No provision of the Act provides a link between the withholding tax on the payment to the annuitant and the attribution rule in subsection 146(8.3).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 146 - Subsection 146(8.3) s. 146(8.3) applied since not yet separated at time of withdrawal even though withholding for account of spouse 316

Paragraph 153(1)(c)

Administrative Policy

30 November 1991 Round Table (4M0462), Q. 12.1 - Payment of Certain Amounts into an R.R.S.P. (C.T.O. September 1994)

"No source deduction is required to be made on amounts received by a taxpayer in a court judgment for unfair dismissal that are identified as interest accrued before the date of the court's decision".

80 C.R. - Q.10

Where an employer makes a payment into court which the employee may or may not accept, the employer is responsible for withholding.

If an amount is awarded by the court to compensate the employee for not having received the termination payment at an earlier time, that amount is subject to withholding.

Paragraph 153(1)(g)

Administrative Policy

7 October 2016 APFF Roundtable Q. 1B, 2016-0652761C6 F - T4A filing

limited exceptions to T4A reporting

ITA s. 153(1)(g) and Reg. 200(2) require the issuance of T4As for most services received. At an earlier juncture, CRA was studying its T4A practices. It has now confirmed that there will be no change, although it will maintain the exception for:

i) where the payment made is less than $500, to the extent that no tax is withheld in respect of the amount, and
ii) where personal services are rendered to an individual by a professional or anyone else practising a trade, or if the services are rendered for the repair or maintenance of the principal residence of an individual.

CRA did not discuss the still-extant statement in RC4157 that:

The CRA is not assessing penalties for failures relating to the completion of box 048 [labelled “Fees for services”].

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 200 - Subsection 200(1) no expanded relief from the broad T4A reporting requirements 252

30 October 2012 Ontario CTF Roundtable Q. 10, 2012-0462961C6 - 2012 Ont CTF Q10 - Executors' Fees and Withholding

After stating that an estate would be required to issue a T4A to an executor who was earning his fees as business income rather than income from an office, CRA referred to its policy not to require a T4A for payments less than $500, and then further stated:

Also, as noted on page 16 of the T4A guide (RC4157), "Until such time as the CRA undertakes a review for the purposes of clarifying the types of fees for services that are to be reported on the T4A slip, taxpayers will not be penalized for failing to complete Box 048 on the T4A slip."

13 June 2003 TI

Where a lawyer, who is a member of a professional partnership, is a director of a corporation, the director's fees paid to him will not be subject to source deductions if it is the partnership that has earned those amounts.

RC4157 Rev. 12 "Deducting Income Tax on Pension and Other Income, and Filing the T4A Slip and Summary"

Box 048 - Fees for services

Enter any fees or other amounts paid for services. Do not include GST/HST paid to the recipient for these services.

Note: Until we identify the types of fees for services that are to be reported on the T4A slip, taxpayers will not be penalized for failing to complete box 048.


Paragraph 153(1)(q)

Administrative Policy

7 February 2018 Internal T.I. 2017-0711961I7 - Withholding on RCA payment to partnership

members of a partnership treated as the payers of RCA withdrawals made to the partnership employees for source deduction purposes

A retirement compensation arrangement (RCA) consists of a supplementary retirement plan (for one employee) that has developed surplus that the employer wishes to withdraw without withholding (based on a waiver letter requested by it to be provided by CRA to the custodian) on the basis that the employer, as a partnership, is not taxable under Part I of the Act. In rejecting the employer’s position, the Directorate stated:

Since the Payment is not a “lump sum payment” for the purposes of the withholding rules, it is subject to subsection 102(1) of the Regulations. … Since Schedule I does not address this situation, the Payment is subject to subsection 106(1). Under this rule, withholding is generally based on the amount of tax that may reasonably be expected to be payable under the Act by the recipient with respect to the payment.

Although no tax is payable under Part I of the Act by a partnership, subsection 96(1) of the Act ensures that the members of the partnership are taxable on their respective share of the partnership’s income. In our view, in applying subsection 106(1) of the Regulations in this situation, the amount to be withheld from the Payment should be equal to the total amount of tax that may reasonably be expected to be payable under the Act by the members of the employer partnership with respect to the Payment.

…In filing their income tax return for the taxation year in which they report their share of the partnership’s income, each member of the partnership would be entitled to apply their share of the income tax withheld in respect of the Payment.

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 103 - Subsection 103(6) withdrawal of RCA surplus was not a lump sum payment 170
Tax Topics - Income Tax Regulations - Regulation 106 - Subsection 106(1) members of partnership were respective payers of RCA withdrawal 165

Subsection 153(1.01) - Withholding — stock option benefits

Administrative Policy

7 October 2011 Roundtable, 2011-0411951C6 F - Retenues à la source - options d'achat d'actions

treatment of net share issuances under review

In response to questions as to the treatment of an issuance of a net number of shares to an exercising employee so as to permit the employer to cover its s. 153(1.01) obligations through recourse to the balance of the shares covered by the exercised stock options, CRA indicated that it could not respond as this area was undergoing review.

Other locations for this summary
Tax Topics
Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 6204 - Subsection 6204(1) - Paragraph 6204(1)(a) conferral on employer of share repurchase right to set off against source deduction obligation engages the exclusion 65
Tax Topics - Income Tax Regulations - Regulation 6204 - Subsection 6204(1) - Paragraph 6204(1)(b) loss of prescribed share status where employer granted redemption right to cover s. 153(1.01) withholding obligations 116


Barbara Worndl, Ron Choudhury, "New Stock Option Benefit Withholding Provisions - a Critical Look", Taxation of Executive Compensation and Retirement, 2011, p. 1386.

Paragraph 153(1.01)(b)

Administrative Policy

3 January 2018 Internal T.I. 2017-0709811I7 - Withholding on CCPC stock option benefit

withholding does not apply to s. 7(1.1) stock option benefits

The Directorate noted that upon exercise, s. 7(1.1) provides that the s. 7(1)(a) benefit was deemed to not be received by the employee until the subsequent taxation year of disposition of the shares. However, although s. 153(1.01) “generally ensures that an amount deemed to be received as a benefit under paragraph 7(1)(a) is subject to the withholding and remittance requirements in subsection 153(1) as if it were a bonus”:

paragraph 153(1.01)(b) excludes from these requirements any amount deemed to have been received in a taxation year as a benefit because of a disposition of securities to which subsection 7(1.1) applies. Accordingly, no withholding would be required under subsection 153(1) in the situation described above.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 7 - Subsection 7(1.1) no withholding if benefit deferred under s. 7(1.1) 60


Dov Begun, "Equity Based Compensation and Stock Options", 2017 Annual CTF Conference draft paper

No withholding on s. 7(1.1) exercise (p.14)

[O]n the exercise of a CCPC option that complies with and is eligible for the deferral under subsection 7(1.1), no obligation to withhold is imposed on the employer. [fn 29: Paragraph 153(1.01)(b). See… 2017-0709811I7 … .]

Subsection 153(1.02)

Administrative Policy

Frequently Asked Questions – Temporary Wage Subsidy for Employers 30 March 2020 CRA Webpage

1. Overview of wage-subsidy COVID-19 response

The Temporary Wage Subsidy for Employers is a three-month measure that will allow eligible employers to reduce the amount of payroll deductions required to be remitted to the … CRA … .

2. Eligible employers

You are an eligible employer if you are a(n):

  • individual (excluding trusts),
  • partnership (see note below),
  • non-profit organization,
  • registered charity, or
  • Canadian-controlled private corporation (including a cooperative corporation) eligible for the small business deduction;
  • have an existing business number and payroll program account with the CRA on March 18, 2020; and
  • pay salary, wages, bonuses, or other remuneration to an eligible employee.:

… Partnerships are only eligible for the subsidy if their members consist exclusively of individuals (excluding trusts), registered charities, or Canadian-controlled private corporations (CCPCs) eligible for the small business deduction.

3. Computing the subsidy

The subsidy is equal to 10% of the remuneration you pay between March 18, 2020, and June 20, 2020, up to $1,375 per employee and to a maximum of $25,000 total per employer.

… Associated CCPCs will not be required to share the maximum subsidy of $25,000 per employer.

5. Receipt of subsidy

Once you have calculated your subsidy, you can reduce your current remittance of federal, provincial, or territorial income tax that you send to the CRA by the amount of the subsidy. …

6. Commencement of reduction

You can start reducing remittances of federal, provincial, or territorial income tax in the first remittance period that includes remuneration paid between March 18, 2020, and June 20, 2020.

7. Carryforward

If the income taxes you deduct are not sufficient to offset the value of the subsidy in a specific period, you can reduce future remittances to benefit from the subsidy. This includes reducing remittances that may fall outside of the application period for the wage subsidy (after June 19, 2020). …

8. Alternative of claiming annual refund rather than current remittance set-off

If you are an eligible employer, but choose not to reduce your payroll remittances during the year, calculate the temporary wage subsidy on remuneration paid between March 18, 2020, and June 20, 2020. You can then ask for the subsidy to be paid to you at the end of the year, or transferred to the next year’s remittance.

10. S. 12(1)(x) inclusion

... If you receive the subsidy, you have to report the total amount as income in the year in which the subsidy is received.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x) COVID-19 wage subsidy includible in income 127

Subsection 153(1.1) - Undue hardship

Administrative Policy

Guidance on international income tax issues raised by the COVID-19 crisis, CRA Webpage 26 June 2020

CRA referred to the travel restrictions imposed by governments or businesses in response to the COVID-19 crisis as a safety measure for their citizens or employees (the “Travel Restrictions”) and to the administrative response of CRA (being a concession rather than an interpretive approach) which will apply from March 16 until June 29, 2020, unless extended.

COVID-19 required presence in Canada does not affect letter of authority

[A] non-resident employer is required to deduct withholdings at source from the salary that it pays to an employee who is a resident of Canada, regardless where the services are rendered. Where appropriate, the Agency will issue a "letter of authority" to the employee authorizing the non-resident employer to reduce the Canadian deductions at source to take into account the foreign tax credit available to the employee in respect of their foreign tax liability. …

If a Canadian resident employee of a non-resident entity is forced to perform their employment duties in Canada on an exceptional and temporary basis as a result of the Travel Restrictions and that employee has been issued a letter of authority applicable to the tax year including that period, the letter of authority will continue to apply and the withholding obligations of the non-resident entity will not change in Canada as long as there are no changes to the withholding obligations of the non-resident entity in the other jurisdiction.

26 August 2015 External T.I. 2015-0564171E5 F - Paiements d'un RPAC à un Indien

procedure for reduced withholding on pension distributions to status Indian

Respecting a question on the possibility of reducing income tax source deductions where payment is made to a member of a pooled registered pension plan ( "PRPP"), the participant is an Indian under the Indian Act, and the contributions came from exempt earned income, CRA first indicated that although the distribution would first be included in the participant’s income under s. 56(1)(z.3), it would “then be excluded, where applicable, from income when applying paragraph 81(1)(a),” and then stated, “the fact that paragraph 81(1)(a) would apply to income of an Indian does not release the payor of its responsibilities to deduct or withhold sums as prescribed in respect of that income.” Respecting the procedure for relief under s. 153(1.1), it stated:

Generally, the participant must submit Form T1213…to the Taxpayer Services Division of the Tax Services Office with an explanation. However, the participant may choose to send a letter containing all the information required instead of the form. If the request is accepted, the participant will provide the payor with a copy of the letter of authorization from the CRA for the reduction of withholding for the year.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 81 - Subsection 81(1) - Paragraph 81(1)(a) pension distribution to Indian included in income under s. 56(1)(z.3) before excluded under s. 81(1)(a) 114

15 June 2011 Internal T.I. 2011-0405501I7 F - Withholding - stock option benefits

it is up to employer to find a solution for need to withhold from s. 7 benefits

Following the introduction of s. 153(1.31), the employer's withholding obligations respecting stock option benefits will apply even where the employee's only remuneration in the taxation year is in the form of such benefits. In this regard, CRA stated:

[F]ollowing the enactment of new subsection 153(1.31), we are of the view that an employer can no longer relieve itself of its obligation to withhold and remit the amount of Deductions, where there is a taxable benefit under paragraph 7(1)(a), by reason only of the amount deemed to be paid as a benefit under paragraph 7(1)(a) being a non-cash benefit that was the only remuneration paid to that employed person during a particular pay period or where the remuneration or other monetary benefits paid in a particular pay period would be insufficient to cover the amount of the Deductions.

... [A]lthough we are aware that in those situations the employer will have to find a solution to ensure compliance with its obligation to withhold and remit the Deductions, we are not able to comment or provide any potential solutions.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 153 - Subsection 153(1) - Paragraph 153(1)(a) withholding obligation extends to stock option benefits 19

6 May 2011 External T.I. 2011-0399491E5 F - Withholding - stock option benefits

CRA may consider source deductions issue in rulings context

Respecting the situation where the sole remuneration of an employee in 2011 was a stock option benefit, or the cash remuneration in the year was insufficient to cover that required source deductions, CRA stated:

[F]ollowing the adoption of new subsection 153(1.31) … an employer can no longer relieve itself of its obligation to withhold and remit the amount of Deductions … simply because the amount deemed to be paid as a benefit under paragraph 7(1)(a) would be non-pecuniary, it was the only remuneration paid to that employee in a particular taxation year or the remuneration paid or other pecuniary benefits paid in the particular taxation year were insufficient to cover the amount of the Deductions.

… However, we would be willing to consider any particular situation as part of a request for advance rulings.

13 October 2010 External T.I. 2010-0366801E5 F - Impôt minimum à reporter/réduction d'impôt

AMT balance can be carried forward for use in s. 153(1.1) reduction

Can alternative minimum tax balance be carried forward to be taken into account in an s. 153(1.1) application? CRA responded:

To reduce tax deductions at source, an individual needs a letter of authorization from a Tax Services Office. …

Where a taxpayer has an alternative minimum tax balance to carry forward … CRA … will agree to consider the taxpayer's request to reduce tax deductions at source for one of the years to which such balance can be carried forward. The taxpayer must make a written request or file Form T1213 and provide proof that the taxpayer has an alternative minimum tax balance to carry forward.

Income Tax Technical News, No. 41, 23 December 2009 Under "Stock Benefit Withholding Requirements"

6 July 1995 External T.I. 9512605 - LSVCC AND TAX CREDIT AND RRSP

"If satisfactory documentation exists to confirm entitlement, virtually any credit or deduction may form the basis for a request for a reduction of source deductions."

1994 A.P.F.F. Round Table, Q. 21

Where part of a retiring allowance paid to an employee some time subsequent to his discharge must be used to repay unemployment insurance benefits received by the employee subsequent to his discharge, the Department on application may set a level of withholding lower than that contemplated in the Regulations when it believes that deduction of the amount set out by the Regulations would unduly prejudice the recipient.

93 CPTJ - Q.9

RC recognizes that requiring withholding from the employee's cash remuneration on the basis of a substantial non-cash benefit can create hardship to the employee and encourages the employer to make withholdings from the remuneration to the extent possible without imposing hardship to the individual.

24 February 1992 Memorandum (Tax Window, No. 13, p. 22, ¶1613)

RC's general policy is to grant a waiver of withholding if reasonable evidence is provided that the total tax withheld at statutory rates will exceed tax payable for the year, provided all prior years' returns have been filed and all outstanding balances have been paid.

91 C.R. - Q.47

RC encourages employers to make withholdings from employees' cash remuneration to the extent possible, without imposing actual hardship, when an employee stock option has been exercised.

91 C.R. - Q.68

Re criteria for granting a waiver.

11 April 1991 T.I. (Tax Window, No. 2, p. 22, ¶1200)

RC will waive the requirement that tax be withheld from remuneration to non-resident employees if the exemption in ss.115(2)(e)(i)(A) or (B) is available.

88 C.R. - Q.74

While it is not RC's policy to insist on withholding when non-cash benefits are the only income of the employee from the employer, it is expected that withholding will be made where it is possible to do so.

88 C.R. - Q.75

If a non-commission employee is required to travel by his employer and receives a travel allowance, and wishes relief in respect of allowable deductions, RC will normally issue an income tax waiver if the employee can demonstrate that the deductions were previously allowed when filing his tax return.


Anu Nijhawan, "Source Withholdings: Non Resident Employees 'Visiting' Canada", Taxation of Executive Compensation and Retirement, Vol. 15, No. 9, May 2004, p. 412.

Subsection 153(1.3) - Split-pension amount

See Also

Coopers & Lybrand Limitéé v. MNR, 94 D.T.C 1626 (TCC)

The appellant took possession on November 4, 1981 of the business of a debtor and, with the banks' authorization, paid the net amount of the employees' back wages pursuant to the usual payroll procedures of the debtor (including the preparation of payroll slips showing the deduction of source deductions). Before receiving the payments, the employees were required to assign all rights to their wages to the appellant.

In finding that s. 153(1.3) resulted in joint liability for the appellant and the banks (the "mandators") Tremblay TCJ. stated (pp. 1644-1645):

"I am of the opinion that the appellant, a trustee within the meaning of subsection 153(1.3), is deemed to be the person making the payment and that accordingly the trustee and this other person (the mandators) are jointly and severally liable for the amount which subsection (1) states must be deducted or withheld and the remittance to be made on the payment."

It also was noted that the assets of the business exceeded the gross amount of the remuneration in question.

Plaskett & Associates Ltd. v. MNR, 91 DTC 162 (TCC)

Sobier TCJ. accepted a submission that an interim receiver was acting only as a watchman or conservator, and could not make business decisions. Accordingly, the interim receiver was not a "trustee" as defined in s. 153(1.3).

Subsection 153(1.4) - Exception — remittance to designated financial institution


CIBC v. The Queen, 95 DTC 5367 (FCTD)

Although an individual "monitor", which the CIBC appointed to spend substantial time at the saw mill operations of a corporation that had begun to suffer severe losses, became an integral and influential part of the senior management team of the corporation and participated in all significant management meetings and decisions, he was neither absolutely nor substantially controlling the corporation's operations. Accordingly, he was not a "trustee".

See Also

The Toronto-Dominion Bank v. The Queen, 94 DTC 1261 (TCC)

Following default by a corporation, ("Mark Creek") in the repayment of indebtedness to a Bank, the Bank commenced foreclosure proceedings and, approximately 3½ months later, the Supreme Court of British Columbia approved the sale of the secured asset (an inn and related property) to a third party that assumed possession and took over the operations. Sarchuk TCJ. indicated that if Mark Creek had been entitled during the 3½ month period to expect the Bank to act in its interest in and for the purposes of their respective relationship, a fiduciary obligation upon the Bank would have arisen which would have brought the Bank within the ambit of ss.153(1.3) and (1.4), provided that the Bank was "controlling or otherwise dealing with the property, business ..." of Mark Creek and "authorized or caused a payment" referred to in s. 153(1). However, a review of the circumstances indicated that the Bank did not have substantial control over the affairs of Mark Creek, with the result that it was not liable for a failure of Mark Creek to withhold and remit source deductions during the 3½ month period.

Subsection 153(3) - Deemed effect of deduction


Attorney-General of Canada v. Fraser, 97 DTC 5292 (FCA)

While the taxpayer was off work from an injury, his employer continued to pay him his full net salary and remitted source deductions based on the taxpayer's previous salary. These remittances were deemed by s. 153(3) to have been received by the taxpayer. Accordingly, it was not open to the Minister to later accept the employer's position that it had over remitted source deductions and reimbursed a portion of those amounts to the employer.

Subsection 153(4) - Unclaimed dividends, interest and proceeds

Administrative Policy

5 July 1996 Headquarters Letter File No. 11690-9

Discussion of four examples respecting the acquisition by a bookstore of used books.

7 September 1994 External T.I. 9415545 - UNCLAIMED INTEREST & DIVIDENDS

The reference to a "taxation year" and "year" in the preamble to s. 153(4) refers to the taxation year of the broker/security dealer and not to that of the unidentified individual (namely, a calendar year).

10 May 1990 T.I. (October 1990 Access Letter, ¶1480)

The postamble to s. 153(4) does not permit a taxpayer to elect to include the unpaid amount in his income.

88 C.R. - Q.58

S.153(4) will not apply to an issuing corporation in respect of amounts that it has not paid.

Subsection 153(6)


Joint Committee, "Guidance on International Income Tax Issues raised by the COVID-19", 11 June 2020 Joint Committee Submission

Impact of COVID travel restrictions on day count tests for qualifying non-resident employee status

The Guidance on international income tax issues raised by the COVID-19 crisis provided administrative relief for employees who exceeded the 183-day threshold in the Canada-U.S. Treaty because of COVID travel restrictions, but should also address the 45-day and 90-day periods applicable in determining whether an individual resident in a treaty country is a "qualifying non-resident employee" under s. 153(6).

Qualifying non-resident employee


Dov Begun, "Foreign Employers Sending Non-Canadian-Resident Employees to Canada to Work on short-Term Projects May Benefit from Proposed Changes Introduced in the 2015 Federal Budget and Clarified on July 31, 2015", Tax Management International Journal, 2015, p. 634

2015 Budget proposal (pp. 634-5)

In an attempt to address the issue of an exemption from the withholding obligation being available only in the presence of a waiver (often cited as the most onerous provision of the Regulation 102 withholding regime), the 2015 Budget introduced an exemption to the Regulation 102 withholding requirement in respect of payments made by "qualifying non-resident employers" to "qualifying non-resident employees." Under the new proposal, where a qualifying non-resident employer pays salary, wages, or other remuneration to a qualifying non-resident employee, no withholding is required and more importantly, a waiver is not necessary….[S]ome additional compliance burdens have been introduced into the system.

Addition of 45-day test (p. 635)

[I]n the July 31 Draft Legislation…[t]he requirement that the employee not be present in Canada for 90 or more days in any 12-month period in order to be a qualifying non-resident employee was amended to provide that either the employee works in Canada for less than 45 days in the calendar year that includes the time of payment, or the employee is present in Canada for less than 90 days in any 12-month period that includes the time of payment. For purposes of this "45 days working in Canada" test, days worked in Canada will include only days during which the employee is physically present in Canada and paid by his or her employer for the time spent in Canada, which generally excludes weekends, days off, and holidays….

Many employers may be better able to monitor "work days" than simple presence in Canada….

Deletion of PE test (p. 636)

One of the primary concerns identified by the Canadian tax community with the definition of "qualifying non-resident employer" as defined in the 2015 Budget was the requirement that the employer not ". . .carry on business through a permanent establishment (as defined by regulation! in Canada."…

The July 31 Draft Legislation eliminated in its entirety the requirement that the employer not carry on business through a permanent establishment….

No clarification of certification process (p.636)

The Ministerial certification process introduced in the 2015 Budget remains unchanged — and unclarified — in the July 31 Draft Legislation. In addition to the authority to certify an employer (coupled with the ability to revoke such certification), the Minister also has the authority to provide such certification for a specified period of time…

[I]t remains to be seen whether the certification process will be so onerous that it deters employers from attempting to comply with this certification process.

T4 reporting even where withholding exemption (p.637)

[U]nder the new proposals, even where the exemption from the withholding obligation is available, the employer will continue to be subject to the reporting requirements under the Income Tax Act (Canada) with respect to such payments and will have to complete and file the necessary T4 slips and T4 Summary.

Subsection 153(7)


PWC, "Non-Resident Employer Certification Program: Compliance Reviews and other Updates", PWC Tax Insights – Global Mobility Services, Issue 2016-47, 12 October 2016

CRA indicates that qualifying non-resident employers can file T4s for their affected employees without obtaining individual tax numbers

Scope of CRA review requests to qualifying non-resident employers (QNERs) (p.2)

In early September 2016, the CRA started issuing review letters to certain QNERs…[to] request…the following information:

  • the number of employees who have come to Canada during a certain period
  • an explanation of what documentation the employer has obtained to support each employee's country of residence
  • an explanation on how the employees are expected to be exempt from tax in Canada under a tax treaty
  • the number of days each qualifying non-resident employee was either working in Canada, or present in Canada, including arrival and departure dates, and
  • the employment income attributable to each employee's workdays in Canada

CRA waiver of requirement for QNERs to obtain Individual Tax Numbers (ITNs) for qualifying non-resident employees (QNEEs) (pp. 2-3)

As part of the Certification program, QNERs must file Canadian T4 slips for any QNEEs earning more than C$10,000 of remuneration attributable to Canadian workdays during the year.

Previously, it was anticipated that QNEEs earning more than C$10,000 of Canadian source remuneration during the year would be required to apply for ITNs for T4 reporting purposes.

However, the CRA recently advised that:

  • ITNs are not necessarily required for these T4 slips, and
  • a QNER's certification status will not be rescinded if T4 slips for QNEEs are received without ITNs

BN requests triggering GST nexus reviews (p.3)

Non-resident employers that file for Certification must have a Canadian BN. …As the CRA has processed the Canadian BN applications over the past several months, it has issued various follow-up queries…to determine whether the non-resident employer is carrying on business in Canada from a…GST…perspective.

PWC, "New Non-Resident Employer Certification program: Payroll withholding relief for foreign employers with frequent business travellers to Canada", Tax Insights, Issue 2016-02, 15 January 2016

CRA transitional relief (p. 2)

Notably, as part of the transition to this new employer certification program, the CRA will consider granting approval retroactive to January 1, 2016, for any RC473 forms that they receive by the end of day on February 1, 2016. Employers who file after February 1, 2016 will receive certification effective from the date of approval.

Application requires only basic details (p. 3)

With respect to Form RC473, it is straight-forward in nature and requires only basis details about the employer. The employer certification process does not require non-resident employers to provide employee details or any travel data up front to the CRA. Instead, Form RC473 mainly serves as a notification to the CRA that the non-resident employer will have non-resident employees working in Canada during the certified period.


RC473 Application for Non-Resident Employer Certification 12 January 2016

Application first

Applications should be received at least 30 days before a qualifying non-resident employee starts providing services in Canada. …[U]ntil you receive an approval letter, you must continue to withhold and remit tax on payments made to your employees unless an employee-specific waiver has been provided to you by the employee.

Alternative of waiver applications

Non-resident employees who are not qualifying non-resident employees or whose employer does not become certified can still apply to the CRA for a waiver of withholding using Forms R102-R, Regulation 102 Waiver Application or R102-J, Regulation 102 Treaty Based Waiver Application - Joint Employer / Employee or R106 Regulation 102 Waiver Application - Film Industry.

Requirements placed on certified qualifying non-resident employer

Upon certification the non-resident employer must:track and record the number of days each qualifying non-resident employee is either working in Canada, or is present in Canada, and the income attributable to these days (or any other criteria relevant to applying the treaty exemption) on a proactive basis; determine if the employee is resident in a country with which Canada has a tax treaty; evaluate and document if the qualifying non-resident employee’s remuneration is expected to be exempt from tax in Canada under a tax treaty between Canada and the employee’s country of residence; …; obtain a Business Number and, if required to make remittances, a program account number for payroll purposes. Form RC1, Request for a Business Number, can be attached to this form…; complete and file a T4 Summary and Information Return for those employees who have provided employment services in Canada that are not excluded by [Reg.] 200(1.1)…;…; upon request, make your books and records available in Canada for inspection… .

Although qualifying non-resident employers do not have to withhold income tax on remuneration paid to qualifying non-resident employees during the period of certification, they may still have to withhold Canada Pension Plan (CPP) contributions and/or Employment Insurance (EI) premiums. However, there are exceptions… .

Centralized processing

Send the completed form to the Pacific International Waivers Centre of Expertise located at the Vancouver Tax Services Office…PO Box 470, STN MAIN, Surrey B.C. V3T 5B7