Sending employees to Canada? What foreign employers need to know

February 9, 2026
4:01 pm

Foreign businesses that send employees to Canada, whether for short-term assignments, business trips, or project-based work, may inadvertently trigger Canadian payroll tax obligations.

Even where an employee remains exempt from Canadian income tax under an applicable tax treaty, Canadian withholding and reporting requirements can still apply.

Regulation 102 of the Income Tax Regulations[1] and paragraph 153(1)(a) of the Income Tax Act (ITA)[2], play a central role in this context, imposing payroll withholding obligations on employers that remunerate employees for duties performed in Canada.

This article provides an overview of the key employee and employer tax considerations, including income tax exposures, filing requirements, withholding obligations, and available waivers and certifications that may provide relief.

Employee tax obligations in Canada

Liability to Canadian income tax

Pursuant to paragraph 2(3)(a) and subparagraph 115(1)(a)(i) ITA, employment income earned by a non-resident in respect of duties performed in Canada is taxable in Canada.

However, under Article XV of the Canada–U.S. Tax Treaty, remuneration earned by a resident of the United States in respect of employment exercised in Canada is only taxable in the United States, provided that:

the individual’s remuneration does not exceed CAD 10,000; or
the individual is present in Canada for less than 183 days in any 12-month period (which begins or ends in the relevant calendar year), and the remuneration is not borne by a Canadian permanent establishment.

Similar provisions are found in many of Canada’s tax treaties. However, the CAD 10,000 exemption is unique to the Canada–U.S. Tax Treaty.

Filing of an income tax return

Unless an exception applies, any individual earning employment income in Canada is generally required to file a Canadian personal income tax return (T1), even where the income earned in Canada is exempt from tax by virtue of an applicable tax treaty.

Amounts withheld at source from an employee’s remuneration do not represent a final tax liability but instead constitute payments on account of the employee’s Canadian income tax liability, which is ultimately determined upon assessment of the employee’s Canadian income tax return.

Such personal income tax return must be filed by April 30th of the year following the calendar year in which the employment income is received.

Employer withholding and reporting obligations

Generally, any person, including a non-resident employer, who pays salary, wages, or other remuneration to an employee performing services in Canada is required to withhold and remit the applicable amounts to the Canada Revenue Agency (i.e. income tax).^[3]

It is also an employer’s responsibility to prepare and file an annual T4 Information Return (T4 slips and Summary Form) reporting all amounts that were paid to employees.[4] This information return must be filed to the CRA and copies of the T4 slips provided to employees by February 28^th following the end of each calendar year.

There is no minimum threshold for this requirement. As a result, a non-resident employer that sends employees to Canada, even on an occasional basis, will generally be subject to Canadian payroll withholding and reporting obligations.

Employer’s waiver – Non-resident employer certification

An employer resident in a country that has a tax treaty with Canada[5] may apply for a Non-Resident Employer Certification^[6] by filing Form RC473 with the CRA at least 30 days before the employee(s) begins working in Canada. The certification is valid for two years and must be renewed upon expiry.

The certification significantly reduces the non-resident employer’s payroll obligations in Canada. In particular, it allows the employer to be exempt from withholding Canadian income tax on remuneration paid to employees who qualify as qualifying non-resident employees (QNREs).

To qualify as a QNRE, an individual must meet all the following conditions:

Be a resident of a country with which Canada has a tax treaty.
Not be liable to Canadian income tax by virtue of the applicable tax treaty (see above), and
Work in Canada for less than 45 days in the calendar year or be present in Canada for less than 90 days in any 12-month period that includes that time.

Despite the qualifying non-resident employer not being required to withhold and remit Canadian income tax on the salary earned by QNREs in Canada, such an employer remains required to issue a T4 slip, and the employee must generally file a Canadian income tax return, unless the employee is a U.S. resident that earned less than CAD 10,000 while working in Canada.

Employee Regulation 102 waiver

Where an employee does not meet the third condition for QNRE status, but is nevertheless exempt from Canadian income tax under an applicable tax treaty (generally where the individual is present in Canada for less than 183 days in any 12-month period), the employee may apply for a Regulation 102 waiver by filing Form R102-R.

Unlike the Non-Resident Employer Certification, this waiver applies on an individual-by-individual basis.

Canada Pension Plan (CPP) and the Employment insurance (EI)

Canada has entered into social security agreements with many countries, including the United States, to prevent double pension contributions. These agreements may allow an employee temporarily[7] working in Canada to obtain a certificate of coverage, thereby exempting the employee from CPP contributions.

With respect to EI, where foreign employees contribute to a comparable foreign insurance plan in respect of the same employment income, the non-resident employer is generally not required to withhold EI contributions in Canada.

[1] Income Tax Regulations (C.R.C., c. 945)

[2] Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

[3] Paragraph 153(1)(a) of the ITA.

[4] Subsection 200(1) of the Income Tax Regulations.

[5] Including an employer that would be considered resident in a country that Canada has a tax treaty with, if that country treated the employer as a corporation for tax purposes (e.g., a limited liability company formed in the U.S.), and a partnership where at least 90% of the partnership’s income or loss is allocated to partners that are residents of tax-treaty.

[6] Subsection 153(7) of the ITA

[7] Generally, less than five years.

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