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Canada: Extension of withholding tax relief for taxpayers reimbursing nonresident subcontractors

Extended to March 31, 2027

june 29, 2026

The Canada Revenue Agency (CRA) has again extended its Regulation 105 administrative relief policy for taxpayers who reimburse nonresidents for services rendered in Canada through subcontracting arrangements. Thus, such taxpayers will not be required to remit withholding tax (or related interest and penalties) under these rules until March 31, 2027 (from June 30, 2026).

Background

The CRA revised its position on the Regulation 105 rules in 2024 and stated that, when a Canadian resident reimburses a nonresident person for subcontractor fees related to services performed in Canada, these reimbursed amounts are now subject to Canadian withholding tax, effective for reimbursements made after June 30, 2024. The CRA also indicated at that time that it would provide administrative transitional relief for taxpayers on withholding tax, penalties, and interest from July 1, 2024, to September 30, 2024. In September 2025, the CRA extended the administrative relief policy for subcontractors to June 30, 2026 (from September 30, 2024).

Read a June 2026 report prepared by the KPMG member firm in Canada

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