PERSONAL TAX TRAINING

DIRECTORS FEES

By definition, an office includes the position of a corporate director. As such, directors' fees are considered income from office or employment and are subject to specific taxation rules under Canadian tax laws.

Taxation of Directors' Fees

Directors' fees paid to a non-resident for services performed in Canada must be reported on a T4 slip. The CRA requires such fees to be subject to withholding tax unless:

• The services are performed entirely outside of Canada.
• The director attends no meetings or other related functions in Canada.

If a director performs part of their duties in Canada, the CRA's guidance is to apportion the annual fee accordingly and withhold tax on the portion earned for services performed in Canada.

Key CRA Guidelines

• Income must be reported on the appropriate lines of the director's tax return.
• If the non-resident director attends board meetings or other related functions in Canada, withholding tax applies only to the Canadian portion of the income.
• Directors must receive appropriate documentation, such as Form T2201, if applicable.

Exemptions and Special Situations

Under certain circumstances, directors' fees may be exempt from withholding tax, such as when the fees are fully earned outside of Canada and meet CRA criteria for exemption. However, directors and employers are advised to consult CRA guidelines to confirm exemptions.

CRA Resources and Reporting

Employers must accurately report directors' fees and apply withholding tax where required. For further details, refer to the CRA Employers' Guide.

Directors should also consult the CRA guidelines on cross-border taxation and withholding rules to ensure compliance.