CRA finds that a Canadian employer had no source deductions obligations when a resident employee emigrated to another taxing country and performed his duties remotely

An individual, who had been employed by a Canadian-resident corporation, ceased to be a resident of Canada but continued to provide services remotely to his Canadian employer, for which he received a salary that was subject to income tax in the other country. Did Reg. 104(2) eliminate the Canadian employer’s source deduction obligations?

CRA indicated that the Reg. 104(2)(a) exception to Reg. 104(2) did not apply since the remuneration was attributable to his duties of employment performed outside Canada and such remuneration was subject to an income or profits tax imposed by a non-Canadian government. The Reg. 104(2)(b) exclusion also did not apply, given that the remuneration was not reasonably attributable to duties of his employment performed in Canada.

Accordingly, there would be no obligation to withhold by virtue of Reg. 104(2).

Neal Armstrong. Summary of 19 March 2025 External T.I. 2024-1043781E5 under Reg 104(2).