What taxes do I need to report as an independent contractor in Canada?
By CO Staff | September 29, 2013
I am an independent reseller selling education programs to clients all over the world. I am paid on commissions. What taxes should I be reporting?
CO Staff answered:
For starters, are you an employee or self-employed? (Take care as there are situations when people assume they are self-employed, but then the Canada Revenue Agency (CRA) deems them to be an employee, which can have consequences for both the employer and employee. A good legal contract can help define this.) Our guide for independent contractors provides more information on this: Independent Contractor Guide.
After that, there are two main tax considerations, the HST/GST and your personal income taxes.
Based on your description you may be qualify as a "network seller" under CRA's direct seller category, where special rules apply.
Since 2009 network sellers have been able to use CRA's alternative collection method (ACM). If you meet CRA's conditions your bonuses and commissions would not be subject to HST/GST and would also not be used to determine whether you are a small supplier that needs to register for and collect the HST/GST.
You will want to review CRA's information on HST/GST Rules for Direct Suppliers as you may be a "network seller".
Then there is the income tax component, which we also explain in our independent contractor guide. Essentially, you need to keep track of your expenses, track your earnings and report your net income. Self-employed individuals do not need to file their returns until the end of June, but you still need to remit any taxes owing by the April 30 deadline. These two articles will help further:
Filing Your Business Income Tax Return: A 7 Step Guide for Self-Employed Canadians, Sole Proprietors and Partnerships:
Self-Employed and Contract Earnings: How-To File Your Personal Tax Return: