Deadlines: When to File for Your Regulation 105 Refund

One of the most common questions we get from US clients is: "When do I need to deal with this Canadian 15% withholding?"

The answer depends on whether you like paying penalties or getting refunds. Here is the timeline you need to know.

The 6-Month Rule

Technically, a T2 Corporation Income Tax Return required under Regulation 105 must be filed within six months of your fiscal year-end.

• If your Year-End is December 31 -> Deadline: June 30.

The Difference Between "Owing" and "Refund" Deadlines

If you OWE tax (you had a Permanent Establishment): You must pay by the deadline to avoid interest and penalties.

If you are owed a REFUND (Treaty Exempt): The CRA is more lenient. Because you don't owe them money, they typically won't fine you for being a few months late, however, they will hold your refund until you file.

The 3-Year Hard Stop

This is the dangerous one. You have a maximum of 3 years from the end of the tax year to claim a tax refund. If you file 3 years and one day later, the CRA is legally allowed to keep your Regulation 105 withholding forever.

We have seen companies lose tens of thousands of dollars simply because they waited too long.

What If I Am Late?

If you miss the 6-month deadline but you are within the 3-year window:

• File as soon as possible.
• If you are treaty-exempt (Schedule 91), there is usually no late-filing penalty because penalties are calculated based on tax owing (which is zero).

How Long Does the Refund Take?

Once you file, patience is required. Non-resident returns are not processed automatically; they often undergo manual review. Expect 4 to 7 months from the date of filing to receive your cheque or direct deposit.

Frequently Asked Questions

My year-end is different in Canada. Can I change it?
Canada usually expects your detailed T2 fiscal period to match your US fiscal period.

Can I file early?
You can file as soon as your fiscal year ends, provided you have the NR4 slip (which often doesn't arrive until Feb/March).

Do I get interest on my refund?
Yes! The CRA pays interest on delayed refunds, starting from the later of the filing date or 120 days after year-end.

What if I haven't filed for 5 years?
Years 4 and 5 are likely lost causes for refunds, but you should still file to close the compliance loop and avoid future scrutiny.

Is the deadline different for individuals?
Yes. T1 returns for individuals are generally due June 15th, but taxes (if owed) are due April 30th.