13 March 2023 External T.I. 2022-0947251E5 - Withholding on Payment to Non-Resident Employees -- summary under Subsection 104(2)

A resident Canadian corporation pays to its only employee (who ceased to be resident in a previous year) monthly remuneration (subject to income tax in the individual’s country of residence) for duties of employment performed exclusively outside Canada. CRA found that such remuneration was not subject to withholding by virtue of Reg. 104(2) given that, the exclusions both in Regs. 104(4)(a) and (b) did not apply. Although Reg. 104(4)(a) was potentially engaged because of his previous Canadian residency, he was excluded from its application because such remuneration was subject to income tax in the foreign jurisdiction and related to employment duties performed outside Canada. Furthermore, the Reg. 104(4)(b) exclusion did not apply because the employment duties were performed outside Canada. However, an annual T4 slip was required.