Updated Checked by the Tax-Services.ca editorial team How we check
Foreign employees can trigger Canadian payroll duties in two very different ways: they work here, or they work abroad for a company that is based here. The CRA says employers must deduct income tax from non-resident employees in regular and continuous employment in Canada, whether or not the employer itself is a resident. Nationality doesn’t matter. Where the work happens does.
When do you have to withhold on foreign employees?
Start with where the work is done. That one fact decides most of the answer.
If someone performs the job in Canada, you withhold income tax the way you would for anyone else. A tax treaty may mean the person ends up owing nothing here, but the CRA is clear that this doesn’t switch off withholding by itself. You either withhold, or you get relief approved first.
If someone works for you outside Canada, you still deduct income tax, according to the CRA’s page on employment outside Canada. The employee may claim a foreign tax credit on their own return for tax paid to the other country.
What about CPP and EI?
These follow different tests. For CPP, you deduct when the employee usually reports for work at your place of business in Canada, or when they’re a Canadian resident paid from your Canadian place of business. Otherwise employment outside Canada isn’t pensionable unless you extend coverage with Form CPT8.
EI is stricter. The CRA lists four conditions that all have to be true: you reside in Canada or have a place of business here, the employee usually resides in Canada, the job isn’t insurable in the country where it’s done, and nothing else excludes it. Canada also has social security agreements with some countries, so that only one plan covers the worker. Look up whether your worker’s country has one before you assume either way.
| Situation | Income tax | CPP | EI |
|---|---|---|---|
| Non-resident works in Canada for your company | Withhold, unless a waiver or certification applies | Depends on the place of business and any agreement | Depends on the other country’s plan |
| Employee works abroad, reports to your Canadian office | Withhold | Deduct | Only if all four EI conditions are met |
| Employee works abroad, no Canadian link | Withhold | Not pensionable unless you file CPT8 | Usually not |
How can a waiver or certification cut the withholding?
There are two routes. The first is a treaty waiver. You file Form R102-R at least 30 days before the work starts or the first payment is made. The CRA says it will try to process late applications, but don’t count on it.
The second is non-resident employer certification, which suits a foreign company sending staff here for short jobs. You apply on Form RC473, again 30 days ahead. The employer must be resident in a treaty country. The employee must also be resident in one, be exempt from Canadian tax on the pay under the treaty, and work fewer than 45 days in the calendar year or be in Canada fewer than 90 days in any 12 months. The CRA’s page on non-resident employer certification spells out the conditions.
Certification removes income tax withholding only. CPP and EI may still apply, and you generally still file a T4 unless the employee’s total taxable income is under $10,000.
Picture a UK company that sends an engineer to a client site in Ontario for four weeks. If the employer is certified and the engineer meets the day limits and treaty test, no income tax comes off the pay. If the company never applied and nobody withheld, the CRA can come back to the employer for the tax that should have been held back. That bill is a lot harder to explain than a form filed on time. Two missed months of paperwork can turn a routine job into a messy file.
What does normal payroll cost on a $75,000 salary?
Say the employee counts as an ordinary Ontario payroll employee. The take-home pay calculator shows $8,258.60 federal tax, $4,446.06 Ontario tax, $4,246.45 CPP and $1,123.07 EI on $75,000. That leaves $56,925.83 a year, or about $4,743.82 a month.
Now compare a waiver. If the treaty relieves the income tax, your withholding drops by $12,704.66, but the CPP and EI lines may not move. The payroll deductions calculator lets you test a single pay period, and the payroll remittance calculator helps with what you send to the CRA. Those figures assume a resident of Ontario, so they’re a yardstick for a foreign worker, not a ruling.
Where do foreign employee plans go wrong?
The first mistake is starting work before the paperwork. Both the waiver and the certification need 30 days, and an employee who arrives next week has already missed it.
The second is treating a treaty as an exemption you can apply yourself. It isn’t. Someone at the CRA decides that.
The third is forgetting that the employee’s home country has its own rules, which this page can’t cover. And the calculators use Canadian resident rules, so use the income tax calculator only to size the numbers. If a job is more than a short visit, ask an accountant who does cross-border payroll, and bring the treaty country and the number of days.
Keep a simple day count for each visiting worker from the first morning. Dates in and out of the country, plus the days actually worked, answer most of the questions the CRA could raise, and a plain spreadsheet does the job. Pay stubs that match the paycheque the person actually got finish the file.
How we checked the figures
The rules above come from the Canada Revenue Agency pages on non-resident employees, non-resident employer certification, employment outside Canada and CPP for foreign employees, read in October 2026. The dollar examples use 2026 federal and Ontario rates from our own data. No government body has reviewed or endorsed what you read here.
Frequently asked questions
Do I withhold tax if a foreign employee works in Canada?
Yes, unless the CRA has approved a waiver or you hold non-resident employer certification. A tax treaty alone doesn't stop withholding.
How early do I apply for a treaty waiver?
The CRA asks for Form R102-R at least 30 days before the work starts or the first payment is made. Later requests may be processed, but there's no promise.
Does a Canadian company deduct CPP for someone working abroad?
Only if the person usually reports to your Canadian place of business, or is a Canadian resident paid from it. Otherwise you can extend coverage with Form CPT8.
Do I still file a T4 under non-resident employer certification?
Generally yes, unless the employee's total taxable income is under $10,000. CPP and EI may also still apply.
Can I use the payroll calculators for a non-resident?
Use them as a rough guide only. They assume a resident of the province you pick, so a treaty or certification can change the income tax line.
- Self-employed taxes in Canada: income, CPP and GST
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