Regulation 105 Waiver (R105): How to Stop the 15% Withholding

Getting a Regulation 105 refund is great, but waiting six months for your own money is not. For consultants and businesses with tight cash flow, having 15% of every invoice stripped away can be crippling.

The solution? The Regulation 105 Waiver.

If successful, a waiver allows your Canadian client to pay you 100% of your invoice amount, bypassing the withholding requirement entirely. Here is how to get one.

Refunds vs. Waivers: What's the Difference?

A refund is reactive: The tax is taken, and you file a return next year to get it back.

A waiver is proactive: You ask the CRA for permission in advance to not have the tax taken at all. This keeps the cash in your pocket throughout the project.

Who Should Apply for a Waiver?

You should consider a waiver if:

• The contract value is significant (losing 15% would hurt operations).
• You are clearly exempt under a tax treaty (no Permanent Establishment).
• You have your documentation organized and ready before the work starts.

The Application Process (Form R105)

You must file Form R105 (Regulation 105 Waiver Application) with the CRA Centre of Expertise. This is not a simple form; it requires:

• A copy of your contract.
• Identification of all employees coming to Canada.
• A description of exactly what you will be doing.
• An explanation of why you are treaty-exempt or an income/expense statement showing you won't owe tax.

The "30-Day Rule"

Timing is everything. The CRA requires the waiver application to be submitted at least 30 days before the period of service begins or the first payment is made.

If you apply late, the CRA may not process it in time for your first invoice, meaning the 15% will still be withheld on initial payments.

What Happens After Approval?

If approved, the CRA sends a letter to you and, crucially, to your Canadian Client. This letter is the legal authority they need to pay you the full amount without withholding tax. Without this physical letter, prudent Canadian CFOs will refuse to waive the withholding.

What if My Waiver is Denied?

If denied, or if you didn't apply in time, don't panic. You simply revert to the standard Refund method: let them withhold the 15%, file your T2 return at year-end, and claim it back then.

Frequently Asked Questions

Is a waiver permanent?
No. Waivers are usually specific to a contract/client and a specific time period.

Does a waiver mean I don't have to file a tax return?
No! This is a common myth. Even with a waiver, you generally must file a T2 return to confirm the exemption.

What about my employees' taxes (Reg 102)?
Regulation 105 is for the company. Regulation 102 is for employee payroll. You may need a separate "Regulation 102 Waiver" for employees.

How strict is the 30-day rule?
Very. The CRA is busy. If you submit it 5 days before the job, it likely won't be processed in time for the first payment.

Can I apply for a blanket waiver?
In some cases, for recurring clients, yes. But typically it is per engagement.