Paragraph 153(1)(g) of the Act makes provision for withholding from a payment of fees paid for services on account of the payee’s potential liability for tax under the Act. 

Section 105 of the Income Tax Regulations gives effect to paragraph 153(1)(g) in the context of payments to non-residents.  The purpose of paragraph 153(1)(g) is to ensure that if the non resident recipient of a payment is liable to pay income tax in Canada, then there will be funds available in the form of a percentage withheld and remitted, to satisfy the obligation. R105 withholding is not the final tax amount. It is only a tax instalment, contrary to Part XIII (Tax on Income from Canada of Non-Resident Persons).

Subsection 164(2) allows for this instalment to be applied against any income tax owed by the taxpayer