Shakyuk

This is interesting, I am a contractor in the UK. It sounds as if Canada have this 'disguised employment' legislation that the UK has? Its referred to as IR35 in the UK. There's some test criteria which you ask yourself concerning how you operated e.g. not under direct control and not required to work within certain hours and also some contract terms, such as the right to substitute. Is Canada like that? I thought it was just the UK being a pain in the...

dbd33

It's similar in that there's such a thing as a "deemed employee". You don't want to be a deemed employee but especially you don't want to be the employer of a deemed employee as you're then derelict on various payments employers make for their employees; CPP EHT YADDA and YADDA. If you have a personal corporation which the agent pays then the agent is shielded. The contractor still has the same issues; too many hours at one client, lack of diverse sources of income, facilities at client's office, lack of control of working hours, etc.

Steve_

You just invoice them, the GST is zero-rated. Read the GST guide. You put the GST# on your invoice and add 0% tax. Sounds silly but you can claim input tax credits.

W-8BEN-E is relatively straightforward, well I suppose it is for me because I understand US tax law.

I assume you've set up a CCPC so the answer to question 4 is a corporation. Answer to question 5 is active NFFE. Then you fill in part 25. And the certification.

TBH I think what you're doing here is beyond something that can be explained on an internet forum, for example have you read the guide to filling in a T2 or looked at a T2?

There's various things you need to sort out as regards your corporation, like how you're going to pay yourself. Lots of accountants say take it out as a dividend, personally I think that is bad advice, it makes more sense do payroll.

The CRA has very finely calibrated the tax system so there is no real advantage to using dividends (unlike in the US, which I think is where accountants get the idea from), you end up paying the same amount of tax if you do, if you use payroll though you get the benefit of CPP.

Also, if you're a one-man band there is usually little point in making a profit (thus incurring corporation tax), it's best to zero it out every year which has the added benefit of making your tax return far simpler because you can use the T2 Short Form. (Probably tricky to do in the first year of operation though because you always need a little bit of money left over for bank fees and whatnot.)

So you need to sign up for a payroll account using your BN and do a T4 and T4 return every year.

You need to figure out your pay period (annually makes it the simplest, but most people do monthly) and do withholding, which has to be remitted on a PD7A. You have to do the TD1 first to work out your payroll code and then use the payroll tables in T4032 to calculate how much to remit on the PD7A. (The CRA have now got a calculator on their website to work it out, do monthly and then multiply by 12, that will give you the figure for an annual remittance).

There are various bits of software out there but honestly I never bother, they just make it more complicated. Especially if you need to go back and look at something a couple of years later.

For example TurboTax insists on doing a full T2 and full Alberta corporate return which is far more complex than doing a T2 short form on paper - if you make no profit, there is no need to do the Alberta return.

Sit and carefully read the tax guides and then get an accountant to double-check what you've done for the first year or so.

You should have three accounts with the CRA - one for corporation tax, one for GST/HST and another for payroll. RC, RT and RP.

If you're going to deal with companies in the US you also need to bone up on the implications of various things, like going there in person to do work.

What you don't want to do is have anything that can be described as a US office, because as soon as you do, your corporation becomes liable for filing an 1120-F which is not a fun form. (Read Article V of the US-Canada tax treaty).

If you go down on TN-1 or something to do work there temporarily (more than 183 days), it's far simpler to go on their payroll. Otherwise, lucky you, your CCPC will also need a US payroll.

And, in addition (whichever payroll you're on) you have to file a 1040NR for yourself.

Shakyuk

Cheers good to know!

dbd33

Not at all, should you need any form of pimping service do please advise.

BritCanadaNewbie

Thanks for your help and advice Steve. Good points there for me to think about.

Steve_

Bear in mind by far the most important thing to put down on W-8BEN-E is the word: "CANADA". The purpose of the form is to determine whether payments made to your corporation are subject to US withholding - no they aren't under Article 7 of the tax treaty.

I've had some right run-ins with W-8s over the years because for example they helpfully print off the form with some of the details you've already given them, but then never update it to include all the details you've added when you send it back. The people actually running the accounts dept. then just assume you are subject to 30% withholding.

As far as insurance, they're talking about general liability insurance, I think. Which for a one-man IT company is a bit silly.

BritCanadaNewbie

Hey Guys,
Just found out that getting my cash in USD my bank charges a crazy sum for the conversion.
Anyone know what CAD bank doesn't charge for conversion when receiving US Dollars payments?
Thanks

edit* sorry I meant to say without going down the crazy questrade route

Siouxie

As in incoming international wire transfer fee, do you mean? It's pretty standard and applies to most currencies, I pay $15 (though if I paid it into my business account it would be $30) with RBC. I think the cheapest is probably PC Financial.

BritCanadaNewbie

the conversion fee is additonal to the wire transfer free

Siouxie

I've never paid a conversion fee here (from UK £ sterling into Canadian $) and RBC's exchange rate isn't too bad compared to the rip-off company in the UK that was being used (who also charged me a conversion fee) - who are you banking with?

Additional Services - RBC Royal Bank Accounts & Services (scroll to the bottom)

BritCanadaNewbie

Thanks for the info! Got myself setup

Another question for self employed folks (probably abit of silly question) but is there a benefits services companies which specialize in provided benefits for incorporated folks for benefits (ie dental/medical/employment insurance) or is it just a case of doing each benefit individually with different vendors?

Thanks

Aviator

Chamber of commerce, industry trade associations, Costco, Federation of small business. Often it is cheaper to go it alone. If you make claims, premiums go up.

BritCanadaNewbie

Hi folks, when getting incorperated would you always need to use your personal residential address to get registered?

BritCanadaNewbie

Anyone know how to use your Canada incorperation for UK IT contracting? Is it possible?