Regulation 105 Withholding Tax Calculator Canada 2026
You are paying a foreign contractor or consultant who performs part of the work in Canada. Work out the 15% you are required to withhold, the net cheque the contractor actually receives, whether a waiver would be granted, your T4A-NR obligation, and what it costs you personally if you pay the invoice in full and withhold nothing.
to withhold and remit
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How the Base Was Built
| Component | Amount | In the Base |
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Your Deadlines on This Payment
| Obligation | When | If Missed |
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Points That Decide This More Often Than the Rate
Planning Suggestion
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Disclaimer: This calculator applies the 15% federal withholding under section 105 of the Income Tax Regulations, the additional 9% Quebec withholding where services are performed in Quebec, the 10% penalty under subsection 227(8) for failing to withhold, and simple interest at the rate you enter. It does not model graduated late remittance penalties under subsection 227(9), the 20% penalty for repeated or grossly negligent failures, daily compounding of interest, Regulation 102 payroll withholding on employees sent to Canada, Part XIII withholding on rents, royalties, interest or dividends, GST/HST on imported services, or the contractor’s own Canadian return and any refund arising from it. Waiver eligibility shown here follows the CRA guideline thresholds and is an indication only, not an approval. This page is general information, not tax advice.
What Regulation 105 Actually Requires
Section 105 of the Income Tax Regulations puts the obligation on you, the payer, not on the contractor. If you pay a fee, commission or other amount to a non-resident person in respect of services rendered in Canada, you must withhold 15% of that payment and remit it to the CRA. It applies whether the contractor is an individual or a corporation, whether or not there is a tax treaty, and whether or not the contractor will end up owing a single dollar of Canadian tax.
The 15% is not a tax on the contractor in any final sense. It is security. The CRA holds it against whatever the non-resident is ultimately assessed on a Canadian return, and refunds the excess once that return is filed and assessed. In the very common case where a treaty exempts the contractor entirely, the whole 15% comes back, eventually. That is exactly why contractors object to it, and exactly why payers get talked into skipping it.
Skipping it moves the tax onto you. If you pay the invoice gross, the CRA does not chase the foreign contractor who has already left the country. It assesses you for the amount you should have withheld, adds a penalty of 10% of that amount, and charges interest from the day the remittance was due. Whether you can then recover it from the contractor is a matter of your contract, not of tax law.
What Sits in the 15% Base and What Does Not
The base is the portion of the payment that relates to services physically performed in Canada. Two questions decide it, and both are questions of fact rather than of paperwork.
| Payment Component | Subject to Regulation 105 | Why |
|---|---|---|
| Fees for work done by a person standing in Canada | Yes | Services rendered in Canada, the core case |
| Fees for work done entirely from the contractor’s home country | No | No services rendered in Canada |
| Goods, equipment or software licences | No | Not a payment for services |
| Royalties, rents, interest and dividends | No | Caught by Part XIII withholding instead, at different rates |
| Salary paid to a non-resident employee working in Canada | No | Regulation 102 payroll withholding applies instead |
| Reasonable receipted travel, meals and accommodation reimbursed | Generally no | CRA accepts exclusion where the amounts are supported and reasonable |
| A flat per diem with no receipts behind it | Yes | Indistinguishable from a fee without supporting documents |
| Advance or deposit for services to be performed in Canada | Yes | Withholding is triggered on payment, not on completion |
| Subcontractor fees reimbursed to a non-resident | Yes, from 1 July 2026 | The administrative relief ended on 30 June 2026 |
The Change That Caught Out Subcontracting Arrangements
In June 2024 the CRA revised its position and confirmed that where a Canadian payer reimburses a non-resident for subcontractor fees relating to services performed in Canada, that reimbursement is itself subject to Regulation 105 withholding. Because this reversed how many groups had been operating, administrative relief from the tax, interest and penalties was granted and then extended.
That relief ended on 30 June 2026. Reimbursements of non-resident subcontractor fees paid after that date carry the full 15% obligation with no transitional protection. If your intercompany or master services agreements were drafted around the old position, they now understate what you have to hold back, and the shortfall is yours.
The CRA is also rebuilding the waiver process. Following a public consultation that closed in August 2025, the CRA confirmed it would begin introducing administrative improvements to the Regulation 105 waiver process from late spring 2026, phased in as capacity allows. A separate statutory waiver rule was proposed in the 2024 federal budget but has not yet been enacted. Until it is, the guideline thresholds below are what applications are measured against.
The Two Waiver Routes
A waiver is a letter from the CRA that relieves you of the obligation to withhold. There are two ways to get one, and they answer different questions.
Treaty-based waiver
This argues that the contractor is not taxable in Canada at all, because a treaty exempts business profits in the absence of a permanent establishment or fixed base here. It is the route most consulting and professional engagements use. Eligibility follows published CRA guidelines built around three tests.
| Test | Who It Fits | Threshold |
|---|---|---|
| Low earnings | Non-resident individual working independently | Under $5,000 CAD for the calendar year, including reimbursed expenses |
| Non-recurring presence | Any non-resident whose presence is a one-off | Under 180 days in Canada under the current engagement |
| Recurring presence | Non-residents who come and go across the period | Under 240 cumulative days in the period and under 180 under the engagement |
Income and expense waiver
This does not argue exemption. It argues that 15% of gross is plainly more than the contractor’s actual Canadian tax will be, because Canadian expenses eat most of the Canadian revenue. It is the fallback where there is no treaty, or where the presence thresholds are blown, and it needs a credible projected income statement for the Canadian engagement.
Applying for the Waiver, and the Timing Trap
The application is Form R105, filed by or on behalf of the non-resident with the tax services office that serves the area where the services will take place. It should be filed at least 30 days before the services begin or 30 days before the first payment, whichever comes first.
The trap is that the waiver only protects you from the date of the CRA approval letter. An application in progress is worth nothing. If the money is due and the letter has not arrived, you either withhold or you take the exposure. That is precisely the cash-flow complaint that drove the 2025 consultation, and it is the single most common way a Canadian payer ends up funding a foreign contractor’s tax out of its own pocket.
The contractor usually needs a Canadian number first. An individual applies for an individual tax number and a corporation applies for a business number, and the waiver application is difficult to process without one. Started late, that step alone can push the approval past the payment date. Please build it into the engagement timeline at the contracting stage, not at the invoicing stage.
T4A-NR Reporting Applies Even With a Waiver
A waiver relieves the withholding. It does not relieve the reporting. Every amount paid to a non-resident for services rendered in Canada, other than employment, goes on a T4A-NR slip and information return, regardless of whether tax was withheld, whether a waiver was granted, or whether the contractor turns out to owe nothing.
| Obligation | Deadline | Notes |
|---|---|---|
| Remit the amount withheld | 15th day of the month after the month of payment | Remitted under a non-resident tax account |
| File the T4A-NR information return | Last day of February following the calendar year | Required whether or not tax was withheld |
| Give the slip to the contractor | Same deadline as filing | The contractor needs it to claim the refund |
| Contractor files a Canadian return, individual | 15 June of the following year | Only route to recover excess withholding |
| Contractor files a Canadian return, corporation | Six months after its year end | Treaty-based return still required where exempt |
What It Costs to Get This Wrong
The exposure is not a single number. It stacks.
- The tax itself: the CRA assesses you for the 15% you did not withhold, and the money has already left for a foreign account
- A 10% penalty on the amount not withheld, rising to 20% where the failure is repeated or made knowingly
- Interest from the original remittance date at the prescribed overdue rate, currently 7% and compounded daily
- Late remittance penalties where an amount was withheld but remitted late, graduated by how late the payment was
- T4A-NR late filing penalties, separate from all of the above and applying even where no tax was payable
- Denied deduction risk: the expense itself can come under scrutiny where the payment and its documentation do not stand up
Regulation 105, Regulation 102 and Part XIII
These three regularly get mixed up, and picking the wrong one is a mistake at the payroll stage rather than at the assessment stage.
| Rule | What Triggers It | Rate | Slip |
|---|---|---|---|
| Regulation 105 | Fees to a non-resident for services rendered in Canada, not employment | 15% federal, plus 9% in Quebec | T4A-NR |
| Regulation 102 | Employment income of a non-resident employee working in Canada | Ordinary payroll rates on Canadian duties | T4 |
| Part XIII | Rents, royalties, interest, dividends and management fees to non-residents | 25% statutory, reduced by treaty | NR4 |
We handle the payer side of this end to end. That means confirming whether Regulation 105 applies to your contract at all, setting up the non-resident tax account, preparing the R105 waiver application with the contractor, remitting on time and filing the T4A-NR return. Full details are on our non-resident corporation page.
Frequently Asked Questions
Common questions from Canadian companies paying foreign contractors and consultants.
Related Calculators and Guides
More tools for cross-border payments and non-resident structures.
Paying a Foreign Contractor for Work Done in Canada?
Send us the contract and the itinerary. We will confirm whether Regulation 105 applies, prepare the R105 waiver application with the contractor, set up the non-resident tax account, remit on time and file the T4A-NR return.