Are you sending US employees into Canada for business meetings, client sales support or training (among other activities). Did you know that your company is required to withhold and remit Canadian tax under Regulation 102 of the Income Tax Act, FROM DAY 1 of boots on ground? Despite the fact, that ultimately, the income may not be taxable by Canada under the Canada-US Tax Treaty.
Does it seem like a lot of effort for zero tax? How would the Canada Revenue Agency know that you are sending employees into Canada and failing to comply with Canadian withholding obligations? Actually, as recent clients have discovered, it has become quite simple for the Canada Revenue Agency to uncover your payroll failings…If your corporation is filing a Canadian Corporate Tax Return to protect itself under the treaty or obtain a refund of tax withholding under Regulation 105 (as it is doing business in Canada and a Canadian client has withheld on its payment to you), you will need to identify the amount of payroll paid to non-resident employees performing services in Canada. After that, its a simple double check as to whether you have a Canadian payroll account.
There are methods you can employ to get compliant, individual or blanket waivers and tax filings. But FIRST you need to know if this is an issue…you don’t know if this is an issue until you start monitoring your business travelers. And you may find that once you start monitoring cross border business travel, payroll compliance is just one of your concerns (GST, corporate tax, and immigration to name a few).