CRA Self-Employment Income FAQ

September 16, 2020 Andrew AdolphGST HST Registration,Exports,GST

The taxation rules surrounding self-employment income can be confusing to a lot of people (especially for those that receive self-employment income from clients outside Canada). If you earn self-employment income through freelance sites like Upwork, Fiverr, or do any type of contract work in or outside Canada, you might not have to pay a GST/HST tax.

Even If You Don’t Have to Collect, You Still Must Register for GST/HST

Q: I receive self-employment income from my client, which happens to be a company in the United States, that doesn’t even carry on business in Canada. I recently received a letter from CRA telling me I am required to obtain a GST Business Number. Does this mean I have to collect GST on my billings to my client?

A: Your question is a very common one among people who receive self-employment income from abroad. Lots of people situated in Canada do work “remotely” for companies outside of Canada.

The question actually has two parts:

1. Am I required to be registered for GST?
2. If so, am I required to collect GST on my billings to my non-resident client?

Self-employment Income and Contract Work

Performing a contract is considered a taxable activity for GST purposes. People with less than $30,000 in taxable activity in a year are not required to be registered for GST. However, if your income from contract work exceeds $30,000 in a year, then, you are required to be registered for GST purposes. Performing a contract for a client outside of Canada is considered an export of services. Exports are considered good, and carry a very special GST rate: Zero percent. But, you still have to be registered if you exceed that $30,000 threshold.

OK,  .. so Now I’m Registered – Do I Need to Collect GST On My Self-Employment income?

In many cases, the services you perform from your Canadian location done for and billed to a company outside Canada are considered “zero-rated” under section 7 of Part V of Schedule VI, which says services provided to a non-resident person are taxable at the rate of 0%. This means you can perform these services and charge tax at a rate of zero percent, you will require GST registration, which will entail filing an annual GST return, even if there is no tax to report.

What’s the Point of Being Registered If I Don’t Need to Collect GST?

There are some exceptions to the general rule above, so requiring everybody to be registered souses out those situations.

Because of these exceptions, it is vital to get a CRA Ruling letter for full assurance.

Best Way to Handle This

If you are a contractor working in Canada for a company outside Canada billing over $30,000 per year, you need to register for GST, even though you won’t be required to collect the tax. Not required, but highly recommended, is to obtain a Ruling letter from CRA.

Gateway Tax can set this up for you, so that you can continue on secure in the knowledge that you have done your due diligence when it comes to you obligations under the Excise Tax Act (the GST).

Andrew Adolph

Andrew Adolph is a CPA and former CRA auditor with 25 Years of experience. He helps businesses to not par any more in sales taxs than the law says they must and acts as an advocate for you if you are being audited, so you can fous on your business.