If you are a non-resident providing self-employment or employment services, you may request a waiver or reduction of the normal withholding if you can demonstrate that the withholding will cause you undue hardship.
If you are a self-employed worker providing services in Canada, you may apply for a waiver based on:
- the protection provided in the Independent Personal Services article of a tax treaty between Canada and your country of residence, which provides for an exemption when the income from services rendered is not provided through a fixed base or permanent establishment in Canada, or
- an estimate of income and expenses related to the services that you provide in Canada.
If your application for a waiver under the Permanent Establishment article of the tax treaty is denied, you may still claim a treaty exemption when you file your tax return, if you believe it is applicable. A review may take place at this stage to determine whether the services were performed through a permanent establishment in Canada and therefore whether you can claim a tax treaty exemption.
If you are an employee, you can only claim protection under the Income from Employment article of the tax treaty between Canada and your country of residence.
Outstanding Canadian tax liabilities
The Tax Services Office (TSO) shall review all outstanding tax liabilities of the person applying for a waiver or reduction. Payment, or a satisfactory payment arrangement, must be made before any waiver can be issued.
Canadian income tax returns
For corporations, if previous services were provided in Canada in a year for which a return has not been filed, the TSO may require that the return be filed before a waiver is issued for the current services.
For individuals, if services were provided in Canada in a previous year for which a return has not been filed, the TSO may require that the return be filed before a waiver is issued for the current services. This applies in situations where the applicant may have tax payable for the services rendered in previous years.
Applicant Type - Corporation versus Individual
Non-resident persons providing services through corporations, partnerships or joint ventures, or who have done so in the past, will be reviewed taking into consideration the total of their services provided in Canada over the period, both as an individual and through a corporation, partnership or joint venture. This review will be limited to situations where the individual is not at arm's length from the corporation, partnership or joint venture in question.
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