{"id":50388,"date":"2026-05-15T09:04:33","date_gmt":"2026-05-15T13:04:33","guid":{"rendered":"https:\/\/www.millerthomson.com\/?p=50388"},"modified":"2026-05-15T09:04:34","modified_gmt":"2026-05-15T13:04:34","slug":"consultation-on-the-regulation-105-waiver-process-what-business-owners-service-providers-and-practitioners-need-to-know","status":"publish","type":"post","link":"https:\/\/www.millerthomson.com\/en\/insights\/corporate-tax\/consultation-on-the-regulation-105-waiver-process-what-business-owners-service-providers-and-practitioners-need-to-know\/","title":{"rendered":"Consultation on the Regulation 105 waiver process: What business owners, service providers and practitioners need to know"},"content":{"rendered":"\n

Section 105 of the Income Tax Regulations<\/em> requires payers to withhold 15% on amounts paid to non\u2011residents for services performed in Canada (other than employment). While the purpose of this withholding is familiar (to secure potential Canadian tax otherwise difficult to collect), the practical administration of Regulation 105, and in particular, the waiver process, has long been a source of frustration for business owners, service providers, and their advisors.<\/p>\n\n\n\n

In the summer of 2025, the Canada Revenue Agency (the \u201cCRA<\/strong>\u201d) conducted an external consultation on the Regulation 105 waiver process<\/a>. The stated objective was to gather feedback on how the process works in practice and identify ways to simplify and modernize it while maintaining compliance. The CRA has now released a consultation report summarizing its findings and outlining next steps. This article highlights the key takeaways and what they may mean for affected taxpayers.<\/p>\n\n\n\n

What is Regulation 105? What is the waiver process?<\/h2>\n\n\n\n

Regulation 105 applies to payments made to non\u2011residents for services rendered in Canada. The obligation to withhold applies even where no Canadian tax may ultimately be payable. For example, where income is exempt under an applicable tax treaty.<\/p>\n\n\n\n

The waiver process allows non\u2011residents to request a reduction of (or relief from) withholding where the expected Canadian tax liability is less than 15%. In theory, this is a relieving mechanism. In practice, it often introduces timing, cash\u2011flow, and administrative challenges, particularly in industries operating on short timelines.<\/p>\n\n\n\n

Who participated in the consultation?<\/h2>\n\n\n\n

The CRA conducted the consultation by way of an online questionnaire that was open from June 30 to August 29, 2025. The majority of participants to the questionnaire were tax preparers, accountants, legal professionals, or Canadian business representatives, with significant representation from the arts, entertainment, and recreation sector.<\/p>\n\n\n\n

While the CRA cautions that the results are not statistically representative of all stakeholders, the feedback was consistent enough to identify recurring themes.<\/p>\n\n\n\n

How did participants describe their experience with the current waiver process?<\/h2>\n\n\n\n

The vast majority of participants (74%) interact with the Regulation 105 waiver process multiple times per year, underscoring that this is not an occasional or niche compliance issue. Of those who had experience with the process, approximately three\u2011quarters reported encountering difficulties.<\/p>\n\n\n\n

Overall impressions skewed negative. Fewer than one in five respondents rated their experience as good or very good, while nearly half described it as poor or very poor.<\/p>\n\n\n\n

What challenges were identified?<\/h2>\n\n\n\n

Several concerns were raised repeatedly throughout the consultation:<\/p>\n\n\n\n

Administrative burden and effort to comply<\/h3>\n\n\n\n

Participants reported that the process often requires extensive documentation and manual submission, typically by mail or fax. Many questioned whether the level of effort required is proportionate to the compliance risk.<\/p>\n\n\n\n

Processing delays and lack of transparency<\/h3>\n\n\n\n

Long wait times were the single most frequently cited challenge. Respondents also emphasized the absence of reliable ways to track waiver applications or obtain meaningful updates from the CRA, creating uncertainty for both payers and service providers.<\/p>\n\n\n\n

Cash flow and financial strain<\/h3>\n\n\n\n

The process can create significant cash flow pressure since payments are often withheld or delayed until waivers are approved. This was reported as particularly problematic for performers, crews, and project\u2011based businesses, and may reduce Canada\u2019s attractiveness as a destination for cross\u2011border work.<\/p>\n\n\n\n

Strict withholding despite no underlying tax liability<\/h3>\n\n\n\n

Participants highlighted the disconnect between mandatory withholding and substantive tax outcomes, noting that Canadian businesses are frequently required to \u201cgross up\u201d payments so that non\u2011resident service providers receive their expected net compensation.<\/p>\n\n\n\n

Industry\u2011specific difficulties<\/h3>\n\n\n\n

Industries with high volumes of short\u2011term or event\u2011based contracts, or where treaty relief commonly applies, were identified as being disproportionately burdened by the current system.<\/p>\n\n\n\n

What improvements were suggested?<\/h3>\n\n\n\n

The consultation produced a strong consensus that technology could materially improve the waiver process. Approximately three\u2011quarters of respondents supported the use of digital tools, with the most frequently suggested enhancements including:<\/p>\n\n\n\n