What happens if we file our non-resident services slips late?
The exposure on this kind of filing is charged by reference to the form and the delay rather than to the tax, which is the part payers find counter-intuitive. A year in which the correct amount was withheld and remitted, or in which no tax was ultimately due at all, can still carry a charge simply because the slips went in after they were due. That also means the variable you can still influence is the delay. Once you know slips are outstanding, the useful step is to prepare and file them rather than to wait until the whole position is tidy.
Is there a penalty if a waiver meant no tax was owing?
Yes, that can still happen. The reporting obligation and the tax obligation are separate, and the charge for filing a slip late attaches to the reporting. It is decided by the facts of the engagement rather than by the tax owing, which is why a nil position does not remove it. Payers who obtained a waiver sometimes read the waiver as the end of the matter. It deals with what has to be withheld, not with what has to be reported. Keep the waiver correspondence with the filing, because it explains the withholding and does not excuse the slips.
How does the CRA work out a late filing penalty on a return?
For the 2025 tax year the CRA's late-filing penalty on a return is 5 per cent of the balance owing, plus 1 per cent of that balance for each full month the return is late, to a maximum of twelve months. That charge is measured on tax owing, so it is a different measure from the charge for filing information slips late, and the two should not be mixed when you are quantifying an exposure. Note also that the penalty itself does not compound. Interest is what compounds, daily, on whatever remains unpaid.
Does filing late a second time double the penalty?
No, and that belief has caused payers a great deal of wasted worry. Repetition alone is not the trigger. For the 2025 tax year the higher rate applies where the CRA issued a demand to file and charged a late-filing penalty in any of the three preceding tax years. In that case the return penalty is 10 per cent of the balance owing plus 2 per cent of it for each full month, to a maximum of twenty months. Twelve months becoming twenty is not a doubling of the period, and a second late filing with no demand behind it does not reach the higher rate at all.
Do penalties keep compounding while a slip stays unfiled?
The penalty does not compound. Interest compounds daily on an unpaid balance, which is a different thing, and it is the reason a small liability left alone grows in a way that looks like compounding penalties. For the payer this matters practically. Paying what is owed stops the interest running on it, even while the paperwork behind it is still being put together. Filing the outstanding slips deals with the reporting side. Doing both is what closes the year. Doing neither because you are waiting for a complete picture is the expensive option.
We found unfiled slips from an earlier year, file now or wait?
File. The charge on a late information filing is driven by the form and the delay, so waiting adds to the only part of the calculation still within your control. In practice the work is to reconstruct what was paid to each non-resident, decide which payments related to services performed in Canada, and prepare the slips on that basis. Where the records are thin, a documented reasonable reconstruction filed now is a better position than a perfect one filed a year later. We agree the fee for that work in writing before it starts.
What is a permanent establishment, and how easily do we create one?
A taxable presence in another country under the treaty — typically a fixed place of business such as an office, branch, factory or workshop, or a dependent agent habitually concluding contracts on your behalf. Some treaties add a services test measured in days. Purely preparatory or auxiliary activity is excluded, but that carve-out is narrower than it sounds: one senior employee working from home in the other country, with authority, has been enough. See business profits and permanent establishment.
I have not filed for several years while living abroad — what are my options?
Both countries have routes back, and using one before they contact you is what preserves the relief. On the US side there are procedures aimed at taxpayers whose failure was not wilful, including one designed for people living outside the country, and separate procedures for late account reports and information returns alone. Canada has its voluntary disclosures programme and taxpayer relief for penalties and interest. Filing quietly and hoping is the one approach with no protection attached to it. See catch-up filing.
