Tuesday, 11 December 2012

Canadian Businesses that Engage Non-residents may have to Withhold 15% Tax

When Canadian businesses engage non-residents of Canada to provide services in Canada- in other words be physically in Canada - they may be required to register for HST and payments to them be subject to a 15% withholding tax.  They should file tax returns to claim treaty exemption.  That is to say, that if their country of residence has a tax treaty with Canada which exempts the service provider from being taxed in Canada it should file a tax return to have the 15% withheld refunded. Click here.  Exemption usually applies if the non-resident has a place of business in Canada; a permanent establishment in Canada .  Also non-residents providing a services in Canada -like residents of Canada - should register for HST if their annual revenue from business conducted in Canada exceeds $30,000.  Conducting business in Canada is a question of fact.  Normally if the contract is entered into in Canada the business is considered of having been conducted in Canada.

Get more tax information and Q&A letters from our website www.tavana.ca

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