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September 1, 2014

Tax Tips



Directors' Fees Paid to Non-Residents
Subject: Directors' Fees
Number: 10-07
Date: 2/26/2010
This withholding tax requirement is often overlooked

In a recent technical interpretation (2009-0345151E5), the Canada Revenue Agency (the CRA) indicated that fees paid by a Canadian corporation to non-resident corporate directors may be subject to Canadian tax to the extent they perform their duties in Canada.

If a non-resident director performs directors’ duties partly in Canada and partly somewhere else, an apportionment would be made between the duties performed in Canada and those performed outside Canada. The CRA also noted that the fees should be comparable to the amounts paid to other arm’s-length directors of the corporation.

Does this mean that non-resident directors can avoid Canadian tax if they participate in directors’ meetings by long-distance telephone call or some other electronic form? In the technical interpretation, the CRA stated that the taxation of directors “who participate in meetings of directors or of a committees of directors by means of telephone or other communication facilities, which permit all persons participating in the meeting to hear and possibly see each other, is currently under study.”

Companies should be reminded that fees paid to non-resident officers, directors and employees for duties performed in Canada by the non-resident are subject to withholding tax under paragraph 153(1)(a) of the Income Tax Act and section 102 of the Income Tax Act Regulations (in certain circumstances the withholding rate may be reduced by tax treaty). This withholding tax requirement is often overlooked. The CRA has dedicated more resources to international tax compliance and this withholding tax will likely be the topic of future CRA enquiries.


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The material provided in Tax Tip of the Week is believed to be accurate and reliable as of the date it is written. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Neither the Tax Specialist Group nor any member firm can accept any liability for the tax consequences that may result from acting based on the contents hereof.