Reg 105 vs Reg 102
Both are Canadian withholding on work done in Canada by a non-resident, but one applies to fees for services and the other to employment income.
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Both are Canadian withholding on work done in Canada by a non-resident, but one applies to fees for services and the other to employment income.
Side by side
| Regulation 105 | Regulation 102 | |
|---|---|---|
| Applies to | Fees paid to a non-resident service provider | Employment income of a non-resident employee |
| Withheld on | Gross fees | Employment remuneration for Canadian workdays |
| Waiver basis | Treaty, or an income-and-expense computation | Treaty exemption, or a qualifying-employer certification |
| Who applies | The non-resident provider | The employer, or the employee |
| Timing | Before the fee is paid | Before the assignment, or at its start |
Which one applies to you
Look at the relationship, not the invoice. A contractor's fee goes down the services route; an employee's salary goes down the payroll route. Companies that get this wrong usually treat an employee as a contractor and inherit both problems.
Your next step
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Reviewed for accuracy for the 2025 and 2026 filing seasons by Udit Gupta, Cross-Border Tax Expert, Legal Quotient Consultants. This is general information rather than advice about your file — a short call is the way to get the second.
Where international tax accountant comes into this file
If you came here for international tax accountant, this is where it is dealt with. The subject is reg 105 vs Reg 102, and the page covers who it reaches, what then has to be filed, and what we charge to do the work.
Why choose Legal Quotient for reg 105 vs reg 102
Residence is tested, not assumed
Where you are resident for treaty purposes is a question with a method. We work through it and write down the answer, with the facts it rests on.
The fee is fixed before we start
Quoted from your documents and agreed in writing. The number you accept is the number you pay.
18,000+ clients served
Individuals, expats and corporations across India, the USA, Canada and the UAE have filed with us — 15+ years of cross-border work.
Both sides prepared together
Two returns built against each other by one team, so relief is claimed exactly once and nothing falls between the two systems.
Cross-border tax case studies
Withholding on a consultant invoice reduced by a waiver
A non-resident consultant had a contract to deliver work at a Canadian client site and would have had tax taken from the gross fee, despite subcontractor costs and travel absorbing much of it. We prepared the waiver application on the income and expense basis, assembled the supporting contracts and cost estimates, and lodged it in time for the payer to act on before the first invoice fell due. The engagement produced an approved waiver, a payment released on the reduced basis, and a filing record that supported the position when the Canadian return was later prepared.
An assignment to Canada planned before the employees travelled
An employer was sending staff to a Canadian site for a project and had assumed that because the workers remained on a foreign payroll, nothing Canadian arose. Employment income for Canadian workdays is exactly what the payroll route captures. We reviewed the treaty position for each employee and the employer's own standing, applied for the relief that was open at the start of the assignment, and set up the tracking of Canadian workdays. The engagement produced authorised relief before the first payroll run and a day-by-day record supporting it.
A contractor who was really an employee all along
A company had engaged a non-resident on a contract for services, treated the payments as fees, and withheld on that footing. The working relationship, on examination, had every feature of employment: set hours, supervision, tools provided and no other clients. We set out the analysis, quantified what the payroll route would have required for the Canadian workdays, and approached the authority with the position rather than waiting to be asked. The engagement produced a corrected classification, the payroll obligations brought up to date, and a documented basis on which the relationship continued.
Gross fee withholding recovered through a non-resident return
A non-resident supplier learned about the withholding requirement only when the first payment arrived short, by which point a waiver could do nothing. We collected the withholding documentation from each Canadian payer, prepared the accounts of the Canadian engagement so that the costs of earning the fees could be deducted, and filed the non-resident return. The engagement produced a filed return claiming credit for every amount withheld, a refund of the excess over the tax actually due, and a waiver plan for the following contract so the same money did not sit with the authority again.
A treaty exemption documented before the first payment fell due
A non-resident company with a short Canadian engagement had a clear treaty position but no way to stop its Canadian customer withholding. We prepared the waiver application on the treaty basis, with the certificate of residence and the contract terms that established why the relief applied, and dealt with the queries that came back. The engagement produced an approved waiver in the payer's hands ahead of the payment date, and a written file explaining the basis, which the customer kept for its own records of why it had paid gross.
A payer left holding the liability after paying gross
A Canadian company had paid a non-resident supplier in full without withholding, on the supplier's assurance that no Canadian tax arose. The obligation, and the exposure, sat with the payer. We reviewed the contracts and the work actually performed in Canada, established the amounts that should have been withheld, and set out the options for regularising them. The engagement produced a quantified position, an approach to the authority made by the company rather than prompted by an audit, and a procedure for checking non-resident payments before they were released.
Which Country Taxes the Salary
The employment article turns on where the work is done, who pays, and who bears the cost — three tests that can point in different directions. The file establishes all three before either return is drafted.
Read how this one runsA Home Kept in Canada After the Move Abroad
A dwelling left available is the tie the CRA weighs most heavily, and its treatment differs depending on whether it is rented at arm's length. The file settles the residence position first and the rental reporting second.
Read how this one runsAll case studies — every published engagement in one place.
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Performance income is taxed where earned — Regulation 105 in Canada, withholding agreements in the U.S. — with special treaty articles overriding the usual rules.
Performance income is taxed where the performance happens, and the deduction is usually taken at source on the gross fee before expenses. Recovering the difference is a filing exercise in the other country, and it only works if the tour, the residency and the withholding certificates were documented while the work was being done.
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