# Canadian Independant contractor for a US company



## surya001_4u (Nov 20, 2014)

Hi,

Recently I got an job offer from a US company and I am working completely from home in Ontario, Canada. The company is going to pay me in CADs as per the offer letter. I might be making more than 70,000 per year.
This is first I am working as a contractor so I need some information for the following questions.

1. Do I need to register as a sole proprietorship ?
2. Do I need to charge GST/HST in the invoice ( it is US Company) ?
3. Which is more advisable, sole proprietorship or an incorporation?

Any suggestions are welcomed.
Thanks in advance for your time.


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## Eclectic12 (Oct 20, 2010)

#1 and #3 seem to show that you are aware that there are other options than sole proprietorship.

Are you prepared for the extra work of being an independent contractor?

From what I can tell, this includes but is not limit to more record keeping, paying the CPP employer plus employee contributions, paying income tax in installments, making sure that under both the US as well as the Canadian criteria that one is not re-classed as an employee (as has happened to some independent contractors who only worked for one company).

http://www.taxtips.ca/personaltax/employees/employeevscontractor.htm
http://www.us.kpmg.com/microsite/tax/ies/tea/fall2001/stories/article05.htm
http://www.bookkeeping-essentials.com/independent-contractor-rules.html


For the sole proprietorship verus incorporation ... my understanding is that if a client sues, liability is unlimited where both business as well as personal assets are at risk compared to the limited liability of incorporation. I'd lean towards incorporation (thought it will cost more).
http://www.taxtips.ca/smallbusiness/incorporate.htm
http://www.canadabusiness.ca/eng/page/2853/
http://www.theglobeandmail.com/repo...nc-or-ltd-which-sounds-better/article4258956/


For the GST/HST ... my understanding is the service will be done in Canada so that you will need to charge for it but maybe some with experience can comment.


Cheers


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## Just a Guy (Mar 27, 2012)

1) no, you don't need to register as a sole proprietor, and even if you did you may still be considered an "employee" not a contractor. 

2) if you make over 35k (I may be off on the exact number), you need a GST number and need to charge it...of course, if you don't you're more likely to be classed as an "employee". 

3) general rule of thumb, if you are having losses and another source of income, it's more tax advantageous to be a sole proprietor. If you make profits, it's better to be incorporated. Of course, being incorporated has higher costs for taxes, registration, etc. so it's not quite that simple.

Incorporation is also better, though not guaranteed, to help establish that you are a contractor not an employee...

That part is what both you, and your hiring company, need to make sure is properly defendable as it can be a big problem if CRA determines that you are actually an employee.


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## Eclectic12 (Oct 20, 2010)

^^^^

AFAICT, the "being incorporated has higher costs for taxes" is a YMMV situation.

The G&M article link I posted quotes a corporate responsibility consultant as saying:


> I suddenly owed a huge amount of tax, and it was all at the personal tax rate, rather than the corporate tax rate, which is much lower,” recalls the founder of Toronto-based Impakt Corp.


This may not apply in this case but it is good to be aware of.


Cheers


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## surya001_4u (Nov 20, 2014)

No where in the offer letter they had mentioned me a employee, they have mentioned me as contractor only. In the offer letter they have mentioned me as a supplier to me more accurate. 
They are not going to run any pay roll to me in Canada.
I need generate invoice every month and based on that they are going to pay me.

Regards,
Praveen.


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## Just a Guy (Mar 27, 2012)

It's got nothing to do with their letter, or the lack of a payroll. 

CRA has their own way of determining if you are an employee by their definition. Some things they use to determine it are, but not limited to...

How many other clients you have
Who supplies the equipment
Who pays for certain expenses

Many people and companies have thought they were contractors only to discover they weren't, and that got very expensive. 

To reiterate, it's got nothing to do with what you or the company think, it has to do with what CRA thinks...theirs is the only opinion which matters.


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## Retired Peasant (Apr 22, 2013)

surya001_4u said:


> 2. Do I need to charge GST/HST in the invoice ( it is US Company) ?


From CRA: http://www.canadabusiness.ca/eng/page/2651/

" Foreign customers (outside of Canada)
If you sell goods and services to international customers, you are not required to collect GST/HST or PST, provided they take delivery of the goods or services outside of Canada."


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## Eclectic12 (Oct 20, 2010)

Just a Guy said:


> It's got nothing to do with their letter, or the lack of a payroll.
> CRA has their own way of determining if you are an employee by their definition ...
> 
> Many people and companies have thought they were contractors only to discover they weren't, and that got very expensive.


+1 ... here's an article about CRA's crack down as well as bit of a history of the changing views.
http://www.obj.ca/Technology/2010-11-18/article-1975061/Taxman-cracks-down-on-IT-consultants/1

An article about some of the consequences for the employer.
http://www.hrsbs.ca/employee-vs-contractor-cra-penalties-for-incorrect-worker-classification/



To reiterate, it's got nothing to do with what you or the company think, it has to do with what CRA thinks...theirs is the only opinion which matters.[/QUOTE]


Cheers


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## surya001_4u (Nov 20, 2014)

Hi All, 

Thank you very much for your valuable suggestions. 
Today I had called CRA and explained my situation and they have confirmed that I no need to add HST in the invoice as I am going provide work to states. 
They also mentioned that I need to register for GST/HST account as I am going to make more than CAD 30,000 per year. 

Regards,
Praveen.


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