Under the proposed Interchange Agreement with a non-resident corporation (“NRCo”) and a non-resident employee of NRCo, the employee will provide services to the Department for one year while staying at temporary accommodation in Canada, but will remain a non-resident, as well as remaining on the NRCo payroll as an NRCo employee. The Department will reimburse NRCo for the employee’s salary and benefits (with no mark-up thereof). CRA stated:
Under subsection 102(1) … NRCo would be required to withhold Canadian income tax from the remuneration that it pays to the employee that is reasonably attributable to the employment duties performed by the employee in Canada. … NRCo would not be required to deduct employment insurance premiums if the employee remains a resident of his home country and pays into an unemployment insurance plan there. In addition, NRCo would not be required to deduct Canada Pension Plan contributions if it obtains a Certificate of Coverage for the employee from the government of the employee’s country of residence.