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An overview by Borden Ladner Gervais, Taxand Canada
The Canada Revenue Agency (CRA) has recently revised its policy, now imposing withholding tax on reimbursements to non-Canadian contractors for costs incurred by Canadian subcontractors. Previously, such reimbursements were exempt from Canadian withholding tax. However, under the new rules, effective from September 2024, these amounts will now be subject to a 15% withholding tax.
This change could create unexpected tax liabilities for both non-Canadian service providers and their Canadian customers, requiring them to adjust contracts and tax planning strategies accordingly.
Daniel Lang from our Canadian member firm Borden Ladner Gervais has published an analysis of this policy and its implications in more detail here.
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