Consultation on the Income Tax Regulation 105 Waiver Process

Executive summary

The Canada Revenue Agency (CRA) held an external consultation in summer 2025 on the Regulation 105 waiver process, which requires withholding tax on payments made to non-residents for services provided in Canada. The goal of the consultation was to gather feedback from external parties and identify practical ways to make the Regulation 105 waiver process simpler and more efficient while supporting compliance.

The CRA collected feedback through an online questionnaire, which was open to industry professionals and non-resident service providers affected by Regulation 105.

The consultation participants had a range of experiences with the Regulation 105 waiver process. Some participants did not encounter any challenges with the process, while others described the process as difficult, slow, and administratively burdensome.

For example, they raised concerns about:

• limited guidance from the CRA
• lacking a reliable way to track applications or contact the CRA for updates
• heavy documentation requirements
• short timelines
• confusion about rules and eligibility

Suggestions for improvement included making the waiver process simpler, faster, more predictable, and aligned with modern business practices. Most participants also noted technological tools could improve the process, such as an online submission platform, features to track applications, and automated steps.

The CRA has reviewed all feedback and will implement measures to make the waiver process simpler and more efficient starting in late spring 2026. More information will be provided at that time.

This report includes an overview of the consultation approach and results, what we learned from participants, and next steps.

Background

Section 105 of the Income Tax Regulations requires payers to withhold 15% on payments made to non-residents for services performed in Canada, other than for employment. This withholding is required to cover the potential tax liability that may be owed and helps ensure income earned in Canada is properly reported. Non-residents can apply for a Regulation 105 waiver if they expect their actual Canadian tax will be less than the amount withheld. The waiver process affects a wide range of people and businesses, including non-resident contractors, consultants, performers, and specialized service providers, as well as Canadian companies that hire them.

Consultation overview and purpose

The CRA held a public consultation on the Income Tax Regulation 105 waiver process through an online questionnaire from June 30 to August 29, 2025. The consultation aimed to identify practical ways to simplify the process, reduce administrative burden, and introduce digital solutions that make compliance easier. Although Budget 2024 suggested changing the Income Tax Act to give the CRA more flexibility in granting relief under Regulation 105, this consultation did not focus on that proposed amendment.

The CRA invited the following groups to share feedback on the Income Tax Regulation 105 waiver process:

• Non-residents subject to Regulation 105
• Tax preparers and accountants who help clients with Regulation 105 compliance
• Legal professionals who give advice on international tax matters related to Regulation 105
• Canadian businesses that contract non-resident service providers

We analyzed participant responses using the CRA’s internal artificial intelligence (AI) tools. CRA employees removed personal information from responses before the AI analysis and reviewed the AI-generated findings for accuracy. It is important to note that participant responses are protected within these internal AI tools by the CRA’s strict security protocols. Furthermore, participant responses were not used to train large language models used in AI tools.

Notes:

• While the consultation findings provide valuable insights into the views of participants, they should not be interpreted as representative of the entire Canadian population, specific regions, or client groups.
• Response percentages are calculated to two decimals but displayed as rounded numbers in this report. This may cause added percentages to appear ± 1% of the total. In some cases, totals may appear not to add up to 100% due to this rounding.

Consultation promotion

Information about the consultation, including how to participate, was available to the public on the Consulting with Canadians web page. The CRA also promoted the consultation using CRA’s electronic mailing lists and by sending direct messages to national accounting firms, tax law firms, industry associations, and other organizations impacted by Regulation 105. These organizations shared the consultation within their professional networks and through their public channels, such as websites or newsletters.

Participation

The questionnaire had participation from 103 individuals, 80 of whom completed it in full. Most partial submissions were nearly complete and that data is included in this report.

The majority of participants identified as either tax preparers, accountants, or Canadian business representatives (see Chart 1). They are mostly based in Canada, particularly in British Columbia, Ontario, or Quebec, and the majority had indicated English as their preferred official language (78%). They operate in various industries, with 41% operating or supporting clients in the arts, entertainment, and recreation industry.

Chart 1: Participant types

Responses to: “What is your role or profession?” (103 respondents)

Consultation findings

The feedback collected through the online questionnaire provided valuable insights into how participants experience the Regulation 105 waiver process. The findings below summarize what participants shared about their experiences, the barriers they face, and the improvements they suggest.

Experience with the waiver process

Participants first described how often they interact with the waiver process and how they experienced the process overall. The majority (74%) interact with the process multiple times a year (see Chart 2). In total, 74% said they encountered difficulties, while 26% indicated they did not face challenges.

Overall experiences varied (see Chart 3): 17% rated the process as good or very good, 28% said it was okay, and 48% rated it as poor or very poor. This means 45% had a neutral to positive experience, compared with 48% whose experience was negative.

Chart 2: Frequency of interaction with the Regulation 105 waiver process

Responses to: “How often do you or your clients interact with the Regulation 105 waiver process?” (103 respondents)

Chart 3: Overall experience with the Regulation 105 waiver process

Responses to: “How was your overall experience with the Regulation 105 waiver process?” (103 respondents)

Additional insights from participants

Participants were asked what challenges they experienced with the process and they provided several examples. The issues most often raised were related to the effort required to comply, financial hardship caused by the regulation and the strict withholding requirements. Respondents also mentioned challenges specific to certain industries.

Effort to comply

Applying for a waiver often involves several steps, including gathering many documents and mailing or faxing forms. Participants said the effort to submit an application does not seem proportionate to the level of compliance risk. As well, a majority of participants said long wait times and getting clear answers from the CRA were the most difficult part of the waiver process (see Chart 4). They highlighted it’s difficult for them to track the status of their application or know who to contact at the CRA for updates.

Financial hardship caused by the regulation

When requesting a reduction or a waiver of withholding, payments to non‑resident service providers have to be held until waivers are approved. Participants said these delays can create cash‑flow and payroll challenges and place additional pressure on service providers, such as performers, crews and businesses. They also said payment delays make it harder to deliver time‑sensitive projects and may affect Canada’s overall competitiveness.

Strict withholding requirements

Withholdings are still required even when Canadian tax is not actually owed, for example, because of a tax treaty. Participants noted this often results in Canadian businesses having to “gross up” payments. In other words, they raise the amount paid to non‑resident service providers so the provider still receives the full amount originally intended after withholding is applied. This situation leads to financial pressure for the Canadian businesses. Respondents also said the strict withholding requirements create barriers to cross‑border work.

Industry specific challenges

Participants identified several industries where the waiver process can be difficult to use. They said long processing times are challenging for industries who work with short timelines. They also reported industries with large volumes of contracts are burdened by having to apply for each contract. Some participants noted certain industries may already be exempt from Canadian tax in many situations.

Chart 4: Challenges in the Regulation 105 waiver process

Responses to: “What parts of the Regulation 105 waiver process were most difficult?” (multiple choices allowed) (102 respondents)

Improvements to the waiver process

After describing their experiences and challenges, participants were asked how the waiver process could be improved. The majority of participants (75%) said technological tools or platforms could improve the waiver process, meanwhile, 9% said technological tools would not improve the process, and 16% were unsure. The most common suggestion was for the CRA to offer online submission and tracking (see Chart 5). Participants also recommended the CRA provide better support and guidance as well as consider exemptions for specific industries and adopt attestation-based processes.

Chart 5: Most helpful technological improvements for the Regulation 105 waiver process

Responses to: "Which technological improvements would be most helpful?" (multiple choices allowed) (72 respondents)

Online submission and tracking

Participants suggested the CRA offer a fully digital process that allows users to submit documents online, track their application status, and receive waivers electronically. Some suggested the digital process should automatically complete certain steps, which could make verifying information, assessing eligibility, and making decisions more efficient overall.

Enhanced support and guidance

Participants asked for clearer instructions with step‑by‑step guidance on topics, such as eligibility criteria, required documentation and practical examples to reduce confusion and errors. They also expressed a need for better access to CRA waiver specialists, including options like email support, live chat, and a dedicated phone line for questions.

Exemptions for specific industries and attestation-based processes

When asked if the CRA should consider industry specific needs, 65% of participants said yes, while 35% said no. Some participants suggested the CRA consider exemptions for certain industries whose income is often exempt from tax in Canada, for example, because of tax treaty provisions. The industries that participants most often recommended be exempt from the waiver process include:

• music and performing arts
• film and television commercials
• international shipping
• transportation
• speakers and event-based services
• religious and non-profit organizations

Participants also proposed creating an attestation form or online tool where non‑resident applicants or payers can confirm their payments are exempt from withholding because of a tax treaty. Some participants noted the United States uses a comparable attestation process to reduce or waive withholdings.

In addition to these suggestions, participants also commented on the need for more consistent CRA decision-making and improved internal coordination. Other suggestions included expanding eligibility for the simplified waiver process, which is only available for artists and athletes, and consider retroactively waiving payments in certain situations, so payments made before a waiver decision is issued would still be covered. Participants also urged the CRA to address challenges related to subcontractor fees reimbursed to non‑residents, particularly in light of the CRA’s revised interpretation confirming that such amounts, when connected to services performed in Canada, fall under Regulation 105 withholding.

Conclusion

The consultation provided clear and consistent insights into participants’ experiences with the Regulation 105 waiver process. While some reported positive interactions, many described significant challenges. In particular, they said the process can be difficult to navigate, obtaining helpful support is not always easy, and preparing complete applications can be demanding. Long processing times create pressure for service providers and participants highlighted service providers must still apply and wait for a waiver even when no tax is owed.

Participants were clear that technology could help make the waiver process easier, especially digital tools for application submission, tracking, communication, and overall processing.

Next steps

Building on the feedback collected through this consultation, the CRA is assessing potential changes to improve the Regulation 105 waiver process. In the short term, work is underway to introduce administrative improvements that will help reduce the overall burden on applicants and shorten processing times. In the long term, the CRA is exploring options to enhance the digital experience and improve ease and efficiency for users.

Starting in late spring 2026, improvements will be introduced gradually as capacity permits. Further details on implementation and engagement opportunities will be communicated as plans progress.

Appendix

Online questionnaire

1. What is your role or profession?
   • • Tax preparer/accountant
     • Canadian business representative
     • Applicant/Non-resident service provider
     • Authorized representative
     • Other
2. How often do you or your clients interact with the Regulation 105 waiver process?
   • • Frequently (multiple times a year)
     • Occasionally (once a year or less)
     • Rarely (only when necessary)
     • Never (I have not interacted with the process)
3. How was your overall experience with the Regulation 105 waiver process?
   1. • Very good
      • Good
      • Okay
      • Poor
      • Very poor
      • I haven’t interacted with the process
   2. a. Please tell us more about your experience.
4. Did you or your clients experience challenges complying with Regulation 105?
   1. • Yes
      • No
   2. a. What was the specific challenge?
5. What parts of the Regulation 105 waiver process were most difficult? [Select all that apply.]
   1. • Understanding the rules
      • Sending in the waiver application
      • Long wait times
      • Getting clear answers from the CRA
      • Meeting deadlines e.g. sending a waiver request
      • Other
      • I haven’t interacted with the process
   2. a. How could we make this easier?
6. Can you think of industry-specific needs that the CRA should consider when reviewing the Regulation 105 waiver process?
   1. • Yes
      • No
   2. a. What industry are you concerned with and why?
7. Do you think technological tools or platforms could improve the Regulation 105 waiver process?
   1. • Yes
      • No
   2. a. If yes, which technological improvements would be most helpful?
      • Online tracking of waiver status
      • Digital submission of waiver applications and related documents
      • User-friendly online resources (for example: frequently asked questions, guides)
      • Integration with other CRA systems (for example: for quicker processing)
      • Other
8. Do you have any suggestions for improving the Regulation 105 waiver process?
   1. • Yes
      • No
   2. a. Please share your suggestions.
9. Do you have any other feedback you'd like to share?
10. In which industry do you or your clients primarily operate?
    • • Technology
      • Finance/Banking
      • Arts, Entertainment and Recreation
      • Manufacturing
      • Professional services (e.g., consulting, law)
      • Education
      • Health
      • Transportation
      • Retail
      • Other, please specify
11. Where is your primary location?
    • • Canada
      • Outside of Canada
12. Which province/territory do you reside in?
    • • Alberta
      • British Columbia
      • Manitoba
      • New Brunswick
      • Newfoundland and Labrador
      • Nova Scotia
      • Ontario
      • Prince Edward Island
      • Quebec
      • Saskatchewan
      • Northwest Territories
      • Nunavut
      • Yukon
13. In accordance with the Official Languages Act, what is your preferred official language of communication?
    • • English
      • French
      • Both

Demographics

Chart 6: Respondents’ primary industry

Responses to: In which industry do you or your clients primarily operate? (83 respondents)

Chart 7: Respondents’ primary location

Responses to: Where is your primary location? (83 respondents)

Chart 8: Respondents’ province/territory of residence

Responses to: Which province/territory do you reside in? (69 respondents)

Chart 9: Respondents’ preferred official language of communication

Response to: In accordance with the Official Languages Act, what is your preferred official language of communication? (69 respondents)