Withholding Tax-Invoice of Company from UK

Tax Topics
1

I have a client who has a vendor providing research and development consultancy services from the UK. He is working from outside Canada, and another company is providing IT support from outside Canada.
My question is whether my client is required to deduct withholding tax at the time of payment for remitting to the Canada Revenue Agency, or pay the full invoice amount just like any other invoice. Any guidance will be highly appreciated. Thanks

2

Good luck with that. I recently gone through similar thing with one of my client. He refused to acknowledged that might be the case, said he has always done without witholding without any issues.

If there is any doubt about the residency of the contracted entity, the payer should withhold from the payment.

Types of activities subject to Regulation 105 withholding

¶ 10. The following list includes some activities to which Regulation 105 withholding may be applicable on any fees, commissions, or other amounts paid to non-residents. This list is not meant to be exhaustive.

  • construction projects;
  • installation projects;
  • manufacturing and/or processing;
  • oil and gas operations;
  • entertainment (circuses, carnivals, orchestras, theatrical shows, musicals, air shows, ice-shows, concerts, festivals, etc.);
  • athletic events (golf, rodeos, track and field, motor car racing, etc.);
  • forestry;
  • consulting;
  • legal or accounting services;
  • engineering;
  • lecturing; and
  • seminar/conference presentations.
3

Thanks for the contribution. I understand the client’s perspective and the confusion they may be experiencing. There is a lot to understand here. For example, if I get an invoice from any US supplier, I don’t deduct any withholding tax. I think the answer lies in the interpretation of two things: 1. What is the definition of Non-Resident in the Income Tax Act, and 2. What is meant by “Providing Services in Canada”? Does it mean that if a foreign company does not have an established office in Canada and they work outside Canada, then they don’t fall into the withholding tax clause? Any thoughts?