Taxpayers who reimburse non‑residents for services rendered in Canada through subcontracting arrangements now have additional time before they have to make withholding tax payments on these reimbursements. The CRA recently extended its Regulation 105 administrative relief policy so that taxpayers will not be required to remit withholding tax (or related interest and penalties) under these rules until June 30, 2026 (from September 30, 2024). The CRA previously announced this limited relief after it revised its position on Regulation 105 and found that these reimbursements are technically subject to withholding tax.
The CRA’s administrative relief extension is welcome news for many taxpayers, especially since a proposed new Regulation 105 waiver rule for eligible non‑residents is not yet law. This waiver rule, which allows the CRA to waive the withholding requirement in certain circumstances, was originally announced in the 2024 federal budget. KPMG can help you determine how your business is affected by the CRA’s revised position on the Regulation 105 rules, including to consider whether service agreements should be revised, and to understanding your withholding tax obligations in light of this new change. We can also assist with preparing refund requests for any withholding tax payments made on or after October 1, 2024 and before CRA’s administrative relief extension was announced.
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