Simplified Regulation 105 income tax waiver application for non-resident artist and athletes

A simplified process for non-resident artists and athletes

Non-resident artists and athletes who provide services in Canada are subject to regulation 105 of the Income Tax Act, which states that they are subject to Canadian withholding taxes on income earned while they are in the country. Regulation 105 of the Canadian Income Tax Act requires a payer to withhold 15% of the amount paid for services of an independent nature provided in Canada by a non-resident. Until recently the only way to apply for a reduction of the 15% withholding tax was to complete Form R105, Regulation 105 Waiver Application, and send it, along with supporting documentation, to the centre of expertise nearest to where the services will be provided.

To reduce the time and paperwork involved, the Canada Revenue Agency (CRA) introduced in June 2018 a simplified process for non-resident artists and athletes that allows for the waiver of regulation 105 withholding tax with no advanced approval from the CRA. 

The simplified process

The CRA has created a simplified process for self-employed non-resident artists and athletes earning money for performances in Canada. If you are a non-resident artist or an athlete providing services in Canada for a fee and will earn no more than CAN$15,000 during the calendar year, you can use the simplified process to cut down on paperwork, as well as reduce or eliminate the tax withheld on your earnings in Canada.

The benefits of the process include:

• You do not need an individual tax number or social insurance number. 
• You give your completed form to the entity that will be paying you (the “payer”). You don’t need to interact with the CRA, because the payer takes care of everything.
• You may not need to file an income tax and benefit return in Canada. The CRA will usually not require you to file a return. However, you have the option to file a Canadian income tax and benefit return.

Who can use the simplified process

You can use the simplified process if both of the following apply:

• you are a self-employed non-resident artist or athlete, and
• your total amount earned in Canada is no more than CAN$15,000 in the calendar year. The total includes:
  • the amount you are paid directly for your performance(s)
  • any expenses that are paid for you or reimbursed to you
  • benefits, such as bonuses, sponsorship/promotional income, royalties, and amounts based on ticket sales (overages)

If you’re performing in Canada more than once during the calendar year and your combined earnings will total CAN$15,000 or less, you can apply for a waiver more than once.

It may happen that you unexpectedly surpass the limit through additional ticket sales or other benefits described above. As long as you reasonably expected to be under the CAN$15,000 limit at the time you applied, the simplified waiver will still be valid.

Individual members of a group (for example, a band) may be eligible to use the simplified process, as long as they meet the eligibility criteria, even if the total income paid to the group is over CAN$15,000. This may mean that while some members may qualify, others could be over the limit and will need to use the Form R105 R, Regulation 105 Waiver Application if they want to reduce the tax withheld from their income.

You cannot use the simplified process if:

• you expect that your total earnings will be more than CAN$15,000;
• you are incorporated (not self-employed);
• you are a personal services or traveling corporation through which your services are provided as an artist or athlete; or
• you are considered an employee for the work you will do in Canada.

If you are self-employed but do not qualify, use Form R105-R, Regulation 105 Waiver Application.

If you are a non-resident artist or athlete acting as an employee, please use: Form R102-R, Regulation 102 Waiver Application.

Artists and athletes: how the simplified process works

Your country of residence determines the steps required when you use the simplified process.

Process for residents of the United States

If you are an artist or athlete living in the United States (U.S.) and expect to earn no more than CAN$15,000 for performances in Canada during the calendar year, here’s how the process works:

• Complete Section 1 of Form R105-S, Simplified Waiver Application, and give the form to the entity paying you to perform in Canada (the “payer”).
• The payer will not withhold any of your Canadian income.
• The payer will issue you a T4A-NR tax slip for proof of income earned in Canada by February 28 of the following year.
• Report the amounts you earned in Canada on your U.S. income tax return.

If you do not earn other income in Canada during the calendar year, you have no more actions to take.

Process for residents of countries other than the U.S.

If you are an artist or athlete living in a country other than the U.S., and expect to earn no more than CAN$15,000 for performances in Canada during the calendar year, here’s how the process works:

• Complete Section 1 of Form R105-S, Simplified Waiver Application, and the section of that form called “Income and Expense worksheet.” You can deduct reasonable expenses from your gross revenue (such as travel to and from Canada, accommodations and meals) to arrive at your net income. Give the completed form to your payer. (For more information see Reasonable expense amounts below.)
• New for 2020! Effective January 2020 non-resident artists and athletes living in a country other than the U.S. and who use the simplified process can deduct their agent or manager fees. See Reasonable expense amounts below for more information.
• The payer will withhold tax of 23% on your net income.

If you do not earn any other income in Canada during the calendar year, you have no more actions to take.

Filing a Canadian income tax and benefit return

The CRA will generally agree to waive the filing of a Canadian income tax and benefit return, as long as you qualify for the simplified process, and you have not exceeded the CAN$15,000 limit for income earned in Canada during the calendar year.

Although it is rare, the CRA may ask you later to file a final income tax and benefit return.

You can choose to file a Canadian income tax and benefit return. For more information, go to: Guide 5013-G, General Income Tax and Benefit Guide for Non-Residents and Deemed Residents of Canada – 2017. (Note: Although you do not need an individual tax number to complete Form R105-S, Simplified Waiver Application, you do need an individual tax number to file an income tax and benefit return.)

Payers: your role in the simplified process

As the payer, you have to do the following:

• Complete Section 2 of Form R105-S, Simplified Waiver Application, and sign it, either before the payee performs in Canada or before issuing any payment.
• Keep the original completed Form R105-S, Simplified Waiver Application, on file for a six-year period, in case the CRA asks to see it
• For non-U.S. residents, withhold 23% on their net income and keep any proof of expenses on file that the artist or athlete included with their form.
• Send the amount withheld to the CRA by the 15th of the month following the month you make the payment.
• File a T4A-NR summary and a T4A-NR slip with the CRA, and give the payee a copy of the slip before the end of February of the following year.
• Our publication RC4445 T4A-NR - Payments to Non-Residents for Services Provided in Canada contains instructions on how to complete the T4A-NR summary and slip.

Reasonable expense amounts for the 2020 calendar year

Any amounts paid to the non-resident artist must be included in the gross income. This includes any travel, hotel or meal expenses paid on behalf of, or reimbursed to the artist/athlete.

Regardless of the amounts paid for travel, accommodations or meals, artists and athletes who are residents of countries other than the U.S may deduct in the income and expense section of the R105-S the expenses described below. 

Artists and athletes who are residents of countries other than the U.S. can claim the following amounts to reduce the taxes they will need to pay:

• New for 2020! Agent or manager fees: limited to a maximum of 10% of the gross revenues
• Accommodations: CAN$160 per person, per night
• Meals: CAN$90 per person, per day
• Travel to and from Canada: economy fares for train or airplane, bus, or mileage on personal/rented vehicle (details below)

To claim any other expenses, the artist or athlete must either use the regular waiver (R105 Regulation 105 Waiver Application) or claim them when they file a Canadian income tax return.

Information specific to travel expenses

From home base to Canada and return

Artists or athletes who travel directly to a Canadian location to perform and return directly to their home base afterwards may claim the full cost of the travel to and from Canada.

To Canada as one stop of many on a tour

When making additional stops, artists and athletes can claim travel expenses based on the cost of travel to Canada, one-way only, from the last stop outside of Canada to the location in Canada where the services will begin.

Mileage

Mileage can be claimed when a personally owned or rented vehicle is used. The present mileage rates include all rental costs, repairs, capital cost allowance, maintenance, insurance, gas, and oil:

If there are receipts for the travel expenses, the payer should be given copies for their records.

International tax and non-resident enquiries

Call these numbers for international and non-resident enquiries: International tax and non-resident enquiries phone numbers and hours of service.