I’m a Canadian resident. I’m about to start doing web site maintenance work for a US company (as a contractor). I will do all work from Canada.
As far as I can tell, I don’t have to pay taxes to the IRS because of a treaty between Canada and the US, but what I don’t know is what forms, if any, do I have to fill in for my client. Do I have to charge PST, GST, or no tax at all?
I’m asking becasue my client doesn’t know, and they want to know exactly before I can start working, and they think I’m the one to find out.
You seem to be aware of this, but just to make sure, it’s not at all your responsibility to do that kind of research for anyone else’s company. Demanding your direction in this matter, when you have no expertise or authority to give it, brings up all sorts of red flags.
I’d be weary about working with any “company” that doesn’t know what it’s tax liabilities are (or how to find out). If you’re going to move forward with them, make sure you have a signed legal contract before you do any work.
As far as taxes go, my understanding is this:
If both you and the employer company are in the US, you would need to fill out a W-9 form, which is a request for tax payer social security # (or EIN). They would then 1099 you at the end of the year.
If the contractor is OUTSIDE the US, and doesn’t have a US Social Security #, they don’t have to fill out a W-9 form. The employer company can still send you a 1099 form at the end of the year, but it’s just for their expense records; you’re not expected to do anything with it.
I’m not sure how this applies to Canada, you should definitely call your tax office to get the specifics.
I have billed US companies from Canada. NO PST, no GST, NO EIN or SSN nymber required. No government forms. Firehous has a good post. Fill out a Form 1099 if the client asks but it is not “required”.
…and always bill in US dollars - not Canadian dollars.
FYI, you have to register for GST (Business Number) if you will be billing more than $30k in any calendar year. Before that, it’s optional. Remember, if you have a business number (the ones for GST end in -RT or -RT0001), you can claim input tax credits. Ie, get the GST back on anything you purchase for your business.
(Ah, the good old days of taxes - I remember them, but not fondly)
It’s definitely not your responsibility to find out how your client needs to handle it, but it is your responsibility to find out how you need to handle it.
I’m in the US and I asked an accountant what I would need to do to hire independent contractors from outside the country, e.g. some European countries, and she said that I should have any contractor I hire complete a W-8BEN for my records. I have no clue what they would need to do to satisfy their local tax requirements.
That much might not even be required in your situation – for all I know, Canada and the US are cozier in that area than the countries I inquired about.
Yup, get a GST number and file a GST return every year - even if your GST billings are 0… You can get GST back on any items you purchased for running your business as long as you keep track of the expenses and keep the receipts.
And you just count it as part of your regular self-employment or business income each year - convert to Cdn$$ for your income (handy thing to do is note the Cdn $ amt when you go deposit the USD cheque in your account). You don’t charge GST or PST to out-of Canada clients.
It’s just as much of a pain sometimes to calculate things in Canada itself - if it’s your own province you have to charge both taxes on products sold, if it’s Canadian purchaser but not in your province where you are based then just GST, and for the 3-4 provinces (East Coast) that have HST (Harmonized Sales Tax) then you have to charge them the full 15% which includes the GST and process accordingly afterwards… PITA!
Generally with services only (not product) then just follow the rule of if under 30k/yr you can choose whether or not you collect/remit GST (if you have to buy things there is a benefit to collecting it, as you can get back more than you collect in credits) and the PST rule is also similar - over a certain amount per year you should charge PST also on eligible items. GST is the “Goods and SERVICES Tax” so design services etc do need to charge it.
The expense would still be classified as a contractor expense.
Basically, it’s the same stuff you’d do for a US contractor-employee, but you don’t have to get their tax info (because they obviously don’t have any). It would be your outside-contractor’s responsibility to declare income in their own country.