Canada: COVID 19 - CRA Provides administrative relief for international tax issues arising from COVID-19 travel restrictions

In brief

As a result COVID-19, a number of international travel restrictions have been imposed by governments and businesses. Taxpayers have raised concerns that these travel restrictions could result in a number of potential Canadian tax issues.  In response to the concerns raised by taxpayers, the Canada Revenue Agency (CRA) has announced administrative relief relating to certain of these issues.  The CRA has also undertaken to review additional issues on a case-by-case basis.


Given the uncertainty of the duration of the travel restrictions, the CRA has limited the relief to the period from March 16 to June 29, 2020. The CRA has indicated that the relief will then be extended if necessary, or rescinded if no longer required.

The relief applies to five impacted areas: (i) tax residency, (ii) carrying on business in Canada/permanent establishment determinations, (iii) cross-border employment income, (iv) certain waiver requests and (v) requests for compliance certificates in connection with dispositions of taxable Canadian property as follows:

Tax Residency


  • Where an individual has remained in Canada solely because of travel restrictions, that factor alone will not cause the CRA to consider the individual to be resident in Canada under the common law factual determination test.  Canada also has a deeming rule pursuant to which an individual may be deemed to be resident in Canada if he or she is physically present in Canada for a period of 183 days or more in a tax year.  Where an individual is unable to leave Canada solely due to travel restrictions, days spent in Canada will generally not count towards this limit, provided that the individual does return to his or her country of residence as soon as he or she is able to do so. 


  • Generally, a corporation that is established under a foreign law will be resident in Canada if its “central management and control” is located in Canada. A key factor in this determination is the location of board of director meetings. For jurisdictions with which Canada has a tax treaty that, unlike the Canada-U.S. tax treaty, contains a corporate residency tie-breaker rule that looks to the corporation's place of effective management, the CRA will, as an administrative matter, not consider a corporation to become resident in Canada solely because a director of a corporation must participate in a board meeting from Canada because of travel restrictions.
  • Determinations of corporate residency involving potential dual residency with non-treaty jurisdictions will be determined on a case-by-case basis.

Carrying on Business in Canada / Permanent Establishment (PE)

  • A non-resident entity will not be considered to have a PE in Canada for tax treaty purposes solely because its employees perform their employment duties in Canada (including the 183-day presence test for the purposes a “services PE” under the Canada-U.S. tax treaty) solely as a result of travel restrictions.
  • A non-resident entity will not be considered to have an “agency” PE in Canada solely due to a dependent agent concluding contracts in Canada on behalf of the non-resident entity while the travel restrictions are in force, provided that such activities are limited to that period and would not have been performed in Canada but for the travel restrictions.
  • Relief for residents of non-treaty countries who are carrying on business in Canada due to travel restrictions may be provided on a case by case basis.
  • Regardless of whether relief is available, taxpayers carrying on business in Canada are required to file Canadian tax returns.

Cross-border Employment Income

  • An individual that is a resident of the US may be taxable in Canada on remuneration derived in respect of employment services provided in Canada where the person is present in Canada for a period or periods exceeding 183 days in any twelve month period commencing or ending in the fiscal year concerned. Where non-resident individuals are exercising employment duties in Canada solely as a result of travel restrictions, the CRA will not count those days towards this 183 day test.  A similar approach will be taken in applying the days of presence test in Canada's other tax treaties.

Waiver Requests

  • Payments for services rendered in Canada by a non-resident employee or other service provider are typically subject to Canadian withholding and remittance requirements unless a waiver from the CRA is obtained. Where a waiver request has been submitted to the CRA, but the CRA has been unable to process the request within 30 days, the CRA will not assess a person who fails to withhold and remit the relevant amounts provided that the person took reasonable steps to ascertain that the non-resident payee was entitled to a reduction or elimination of tax by virtue of a tax treaty with Canada and the relevant amount was covered by the particular waiver request.  

Taxable Canadian Property Compliance Certificates

  • Where a request for a certificate of compliance in respect of a disposition of taxable Canadian property has not been processed by the CRA by the time that the purchaser’s remittance is due (i.e., within 30 days after the end of the month in which the property was acquired), the purchaser may request a “comfort letter” from the CRA.  The comfort letter will advise the purchaser to retain the funds they have withheld (instead of remitting them to the CRA) until such time as the CRA is able to process the request and requests that the purchaser remit the required tax.


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