Payroll Services Canadian Social Security Numbers are Invalid

Canadian Social Security Numbers are Invalid

A Canadian Social Insurance Number is not a valid TIN (Taxpayer Identification Number) for the purposes of the U.S. tax reporting and withholding regimes, and thus has no validity for the purpose of claiming a tax treaty exemption on U.S. source income under the USA-Canada income tax treaty. In addition, you should know that tax treaty exclusions are not mandatory and are not automatic: a payee must invoke the benefit of a tax treaty exclusion by delivering to the withholding agent Form 8233 (in the case of income from personal services) or Form W-8BEN (in the case of all other kinds of income).

The failure of the foreign person payee to file either of these forms with the withholding agent leaves the withholding agent with no other choice but to withhold U.S. federal income tax on the payment in the case of those payments which are subject to withholding (e.g.,30% withholding of FIT on an honorarium to an NRA payee). If a Canadian payee uses his Canadian Social Insurance Number as a TIN on Form 8233 or W-8BEN, the forms are invalid for the purposes of claiming a tax treaty exclusion under the USA–Canada income tax treaty. The forms would probably still be valid for the limited purpose of informing the withholding agent that the payee is a foreign person subject to withholding and reporting under Chapter 3 of the Internal Revenue Code.

Lowell G. Hancock
Badge # 50-24286
IRS SB/SE TEC Area 2 (International)