In other words, an actor who provides services as an independent contractor or through a production company may be required to charge, collect and remit GST/HST. One where the materials are paid for by the client as a reimbursement and one where the materials are part of the sale price. Lastly, if your customer was based out of Vancouver, BC, making the place of supply British Columbia, then you would charge them 5% GST plus 7% PST. It can be a bold decision to leave the safety of the traditional workforce behind and do it alone, casting off the certainty of a 40 hour week and stepping into the exciting world . As mentioned above, the rules are very strict. o Even if the business is licensed and generates $30,000+ revenue from non-tax exempt sources, it only charges and pays these taxes on additional non-tax exempt revenue. Agree in advance what kinds of expenses are reimbursable. Businesses that are required to register must charge and collect tax at the time the tax is payable, unless a specific exemption applies to the sale or lease. The HST is just the GST at a higher rate, with a few exceptions. There's more to the GST/HST than this, so be sure to talk to a tax accountant. If a driver is considered a subcontractor, fees paid to them may be subject to GST/HST, if the subcontractor earns over $30,000 in a year. That first sale you make at this point should include GST/HST as per place of supply. LIkewise, if I was a contractor, I would do the same. you need an HST account if you will bill more than $30k in any 12 month . Costs estimated as airfare $440 (incl GST) and accommodation $660 (incl GST).'. And because this company had an office on the ground in Canada, yes, I had to charge HST. You then need to file GST/HST returns to the CRA. It seems that I will make over 30K this year and I . If it's time (or past time) for you to register for the GST/HST, the good news is that it's easy to do. This means you're required to register for GST/HST right away and begin to charge, collect and remit the tax. When you pay self-employment tax on your freelance income, you're paying both the portion of FICA you would normally pay as an employee, and the portion your . Freelance workers usually charge a flat rate for their services rather than . Ask your client if they have a policy regarding expenses, or have your own expense clause in your contract. In general, Subsection 165 (1) of the Excise Tax Act imposes an obligation on recipients of "a taxable supply made in Canada" to pay GST/HST on the value of that supply (in common terms a purchase). This is by no means an exhaustive list, but rather a list of common expenses that many freelancers and independent contractors may incur in their day-to-day operations. Non-Governmental Works contract services - GST rate applicable . Every year, clients' contract staff tell Young Associates bookkeepers that they don't want a T4A slip because they have an HST number.
Parking is one of the items stipulated in our contract that the client pays for. British Columbia. Self-employment tax. If you cancelled your HST account with CRA and are below the $30,000 then you no longer have to charge HST in fact you are no longer allowed to charge HST. A builder is responsible to charge HST on a newly constructed and a substantially renovated home. You have to charge GST/HST on the sale that put you over the $30,000 limit, and on any sales after that, even if you haven't registered yet. Many contractors choose to charge the GST or HST on the cost of the whole project. Independent contractor taxes. If you sell goods and services in Canada, you must charge customers the goods and services tax (GST) or the harmonized sales tax (HST), unless your business qualifies as an exception. Nish. Any advice is much appreciated. Some of these expenses (to us) include HST & some do not. There are certain pieces of information that have to be on invoices if the contractor is charging GST, HST and/or PST. Learn the details of when to register in Real Property Contractors (PDF). Mar 15, 2014 Hairdresser by: Lake Hey Fran, Does a subcontractor charge GST? Such GST/HST payments may qualify for an input tax credit which can reduce your overall GST/HST liability in a particular year. that have "harmonized" with the GST, the HST (Harmonized Sales Tax) applies instead, at a higher rate (13% to 15%). *This article does not deal with employers and employees in the context of a unionized labour force. The new HST will be applied to 12$ so it will become 1.56$ - so the new buyer will pay only 0.36$ more in HST. While the federal government wanted to instate the . Once the income passes the $30,000, the driver has to register for a GST/HST (QST in Quebec) account even for zero-rated . FICA consists of your federal Social Security tax (12.4%) and Medicare tax (2.9%), for a total self-employment tax rate of 15.3% of your net business income. Ask your client if they have a policy regarding expenses, or have your own expense clause in your contract. You are a contractor, not an employee. Canadian Harmonized Sales Tax (HST) is a goods and services tax present in certain provinces of Canada. So if your bill for your services is $4000 this month, you actually bill $4000 plus HST. Depending on your province, this will be HST or GST plus provincial sales tax. The rate of tax to charge depends on the place of supply. Ontario: 13%. A zero-rated supply has a 0% GST/HST rate throughout all of Canada. Others will break down their invoice to show the cost of labour and materials, especially if the client is paying the for the materials out of their own pocket.
The government won't send you a notice or a warning - not right away, at least. Learn more about who is exempt and how to claim a PST exemption in Real Property Contractors (PDF). Essentially the contractor makes $13.00 or 13% off of all material purchases with this structure. I sign an independent contractor agreement every year because I want the work - but understand my working conditions qualify me to have an Employee status. HST has been around for a decade or so. If you are able to fund the project yourself, trust the customers, and only bill at the end of the job, income is taxable when you issue the invoice. There are a few things to know when to calculate the GST and HST. If the service is being performed outside Canada, your taxable supplies are considered export services and you do not have to charge GST/HST. For example, basic groceries are taxable at the rate of zero (0% GST/HST) in every province and territory. When to register to collect PST. As an independent contractor, you will be required to charge your clients sales tax. you need an HST account if you will bill more than $30k in any 12 month . There is case law supporting that if a contract clearly states that the price is "all inclusive", the vendor is limited in later coming after you for GST/HST. It is a flat fee. For example, when your business generates more than $30000 in a year, you are eligible to charge GST and HST. You are a contractor, not an employee. It also means you are not allowed to claim input tax credits. If your total income, before deducting expenses, is less than $30,000, you will be referred to as a small supplier, and you are not required to register for a business number or GST/HST account . Which means you don't have a salary; you issues invoices for your services.
The paragraph relating to deposits above is still applicable if you charge an upfront deposit. It is important to note that GST charged on your invoices is called "GST Collected". The HST is a combination of the General Sales Tax (GST) and the Provincial Sales Tax (PST). Because the HST was only due when the contract was completed (March 15), the invoice date took care of it and the deposits were not charged the HST until the end. You'll actually get your GST/HST number on the spot. Travel - Examples: Flights, accommodations, taxis. Because British Columbia doesn't have HST, but instead has GST and a provincial sales tax, you would need to charge that Vancouver customer both taxes for a combined 12% tax.
Example 2: we incur a charge of $24 for 2 (Provincial . Best Practices for Collecting Reimbursable Expenses. If you earn more than $30,000 a year (or four consecutive quarters or a single quarter) you also need to charge and collect GST/HST. From an accounting perspective, GST and HST collected on a contractor's sales are not revenues of the contractor, but liabilities. 1. To calculate the sales tax on a 55 cent rate (Treasury Board kilometric rate in Ontario) is as follows: 55 / 1.13 = 48.67 (invoiced amount) x 13% HST = 6.32 (HST collected) The next time your renegotiate your contract, I would lay out your reimbursement rate more clearly. An exception to this rule is provided concerning disbursements made while acting as agent for another individual. Contractors should consult with their tax advisors about HST, "input tax credits" and what needs to be remitted to the government. You will be charging HST on your invoices to them. Telecommunication services, including internet services and digital and . How much GST Do contractors pay? 1. However, you may choose take advantage of optional reporting periods as .
This will apply whether they are incorporated or not (i.e. 1. Voluntary Registration for GST/HST In some situations, voluntarily registering for the GST/HST makes sense, even if you are not required. A freelancer is similar to an independent contractor, but they tend to work on a project-to-project basis and have multiple employers at the same time.
I have been working as an independent contractor for the sample company for 14 years. From an accounting perspective, GST and HST collected on a contractor's sales are not revenues of the contractor, but liabilities. The company you are working for is doing the due diligence. GST and HST apply to both the labor and the cost of the materials. Because real estate involves large numbers, the HST tax, when it applies, can be substantial. How much GST Do contractors pay? HST is a combination of the 8% province of Ontario sales tax, and the 5% GST tax of the federal government. There are two main ways contractors can create their invoices. Total Price: $45.99.
Even if you only have one line item for "expenses" on your invoice, always attach an . For more information, see How the GST/HST applies in different situations.. You charge and collect the GST/HST on the supplies that are made in Canada. Including sales tax on your invoice is required by law and helps to maintain your status as an independent contractor. I include this as a line item on my invoice and report it as income to the CRA. 1. For more detailed information specific to your unique case, please consult with a lawyer, a financial advisor, or the CRA . Remember, any expense incurred for the purpose of earning income, as long as it's reasonable, has the potential to be deductible. It's imperative that companies be just as strict in their own arrangements. Because of the different tax implications for employees and subcontractors, the CRA is very strict in distinguishing between them.