Would Reg.104(2)(b) apply to a lump sum payment of a retiring allowance by a Canadian employer to a former employee who is not resident in Canada at the time of payment, if the retiring allowance is attributable to employment duties that were performed by the person either (i) wholly outside Canada, or (ii) partly (1/3) in Canada and partly (2/3) outside Canada during a period when the person was at no time resident in Canada?
CRA responded:
Paragraph 104(2)(b) is intended to preserve the obligation to withhold on a payment to a non-resident person where the remuneration is reasonably attributable to the duties of an office or employment performed or to be performed in Canada by the non-resident person. This could be the case, for example, in respect of a payment resulting from an increase in remuneration with retroactive effect, after the non-resident person's employment has ceased.
There is no provision in … the Regulations requiring an employer to make deductions in respect of the lump sum payment of a retiring allowance to a non-resident person. Consequently, subsection 104(2) is not relevant in this situation.
However, paragraph 212(1)(j.1) could apply to the payment of a retiring allowance to a non-resident person.