To calculate the remuneration subject to source deductions of income tax of an employee who is entitled to a deduction for a foreign employee, you must subtract the portion of the remuneration that gives entitlement to the deduction from the gross remuneration that you pay to the employee for a pay period.

Proceed in this way only if both of the following conditions are met:

• You obtained a certificate or a qualification certificate for the employee from the government body responsible for issuing the certificate or qualification certificate.
• The employment conditions for the pay period are substantially the same as at the time the certificate or qualification certificate was issued.

Calculating the portion of the remuneration that gives entitlement to the deduction

To calculate the portion of the remuneration that gives entitlement to the deduction for foreign employees, multiply the gross remuneration that you pay the employee for the pay period by one of the following rates, as applicable:

• 100% for the first two years of the employee's exemption period
• 75% for the third year of the employee's exemption period
• 50% for the fourth year of the employee's exemption period
• 25% for the fifth year of the employee's exemption period (if the employee works for a corporation that operates an IFC, the rate is 37.5% instead of 25%)

Where only a portion of the gross remuneration that you pay an employee for a pay period was earned during the employee's exemption period, only that portion is exempted. You must withhold income tax, according to the usual method, from the portion of the remuneration that is not related to the employee's exemption period.