Do I have to run Canadian payroll for an employee visiting Canada?
If the employee performs employment duties in Canada, the default answer is yes. Regulation 102 puts a Canadian payroll deduction obligation on the employer for the income attributable to those duties, regardless of where the employer is located or where the payroll is actually run. The obligation follows where the work is done, not where the cheque is written or who the employer banks with. A foreign employer with no Canadian entity, no Canadian bank account and nobody on the ground can still be the person who was supposed to deduct and remit.
My employer is abroad, so why is Canadian tax on my payslip?
Because part of your employment income is attributable to duties performed in Canada, and Regulation 102 requires the employer to deduct on that part. It is not a judgement about your residence or about where you pay tax overall. It is a deduction driven by where you were standing when you did the work. The treaty may well mean that no Canadian tax is ultimately due on the assignment, but relief from the deduction itself has to be arranged separately and in advance. Without that, the payroll deduction runs and the money is recovered by filing.
Can a treaty exemption stop the Canadian payroll deduction?
Not by itself. A treaty exemption that clearly applies is the basis for relief, but the deduction stops only once that relief has been authorised: either by an application made for that employee and that period before the payments are made, or through a certification route where the employer takes on the obligation of tracking eligibility and reporting. Both are advance arrangements. An exemption that is obviously correct on the facts but never lodged leaves the employer expected to deduct, and the employee recovering the money through a Canadian return the following year.
Does Regulation 102 apply to a one day business trip to Canada?
A single day of duties performed in Canada is employment income earned in Canada, so the question is not whether the trip was short but whether relief from the deduction was arranged for it. Short trips often have a strong treaty case, which is what the advance relief routes exist to recognise, and the relief still has to be in place before the payroll runs. The failure in practice is rarely the single trip taken deliberately. It is the dozen short trips nobody was counting, surfacing when an employer is asked to show what was deducted for whom and on what basis.
Does this apply to a contractor invoicing us or only to employees?
Regulation 102 is about employment income: an employer deducting from the wages of a non-resident employee for duties performed in Canada. Fees paid to a non-resident for services rendered in Canada fall under a separate withholding rule, with its own advance application and its own paperwork, and the deduction there is made by the client from an invoice. A foreign company sending its own staff to a Canadian customer can be inside both at once, and relief from one does nothing about the other. Work out which relationship each payment belongs to before deciding what to deduct.
Will my employee have to file a Canadian return anyway?
Often, and it is worth deciding early rather than at the end. A deduction taken under Regulation 102 is an amount held against the Canadian tax on the Canadian duties, not a final figure, so where the treaty exempts the income or the deduction exceeded the tax, a Canadian return is the route by which it comes back. It also means the employee needs the employer's year-end reporting in a usable form. Employers who arranged relief in advance usually have a much shorter conversation here than employers who deducted and left the employee to sort it out.
What is Part XIII withholding?
Canada's flat withholding on certain payments to non-residents — dividends, interest to related parties, rents, royalties, pension and annuity payments, management fees. The payer withholds and remits, and is liable if they do not, which is why they insist on documentation. A treaty can reduce the rate, but only where the recipient has given the payer the declaration establishing entitlement before payment. Where too much was withheld, a refund claim is the route, with its own time limit. See Part XIII withholding review.
Do NRIs pay tax on money sent to India?
Sending your own funds to India is a transfer of capital, not income, so the remittance itself is not taxed. What is taxable is income the money then earns in India — interest, rent, capital gains — under the rules for the account type it sits in. Sending money out of India is the direction that needs certification before the bank will act. See NRE, NRO and FCNR accounts.
