Regarding the situation where LLC, which is a non-resident corporation filing Canadian corporate tax returns and claiming Treaty-based exemptions, paid commissions to the Canadian branch of Company B, a related non-resident corporation operating an Ontario branch and filing Canadian branch returns, CRA stated:
The reference to “every person paying”, for the purposes of Regulation 105, includes any individual, corporation, or trust, whether a resident or a non-resident of Canada. …
Since a “branch” of a non-resident corporation is not a separate legal entity from the non-resident corporation, payments to a Canadian branch of a non-resident corporation made in respect of services provided in Canada are subject to Regulation 105 withholding. ...
Where a non-resident can demonstrate that the normally required Regulation 105 withholding is in excess of the ultimate Canadian tax liability, the CRA may waive or reduce the withholding accordingly pursuant to the provisions of subsection 153(1.1) ... .