CRA provides further background on its policy reversal re Reg. 105 withholding where a Canadian subcontractor

In providing further background on the change that 29 April 2024 External T.I. 2022-0943241E5 made to its position in 2008-0297161E5 that the reimbursement of an expense (including a subcontractor charge) would not be subject to Reg. 105 withholding, CRA stated:

In Weyerhaeuser, the conclusion of the Court was that no withholding was required on amounts paid to reimburse the non-resident contractor for meals, travel and other outlays of the same nature. The position in CRA document 2008-0297161E5 expanded the conclusion of the Court to payments to subcontractors. That CRA position was reversed in [2022-0943241E5].

The 2022 CRA document indicates that the CRA will administer Regulation 105 in a manner which is consistent with the conclusion of the Court. Out of pocket outlays for travel, meals and similar items are not part of the Regulation 105 base where the client has agreed to reimburse them. Otherwise, Regulation 105 applies to fees, commissions or other amounts paid for services rendered in Canada.

See also 2024-1038271C6.

Neal Armstrong. Summary of 19 November 2024 TEI Roundtable, 2024-1039461C6 under Reg. 105(1).