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• The Self-employed Worker
• Self-appraisal
• The Action Plan
• Seven Pieces of Advice from Self-employed People
• Self-employment and Taxation
• Tools for the Self-employed
• Marketing
• The Ergonomic Workstation
• Insurance Coverage
• Eight Steps to Successful Transition

The following information is intended as a reference only. We recommend that you verify all information with federal and provincial departments/ministries. You should also contact municipal authorities for information about permits and business taxes.

What should I do about the famous GST and QST?

You are only required to collect the Goods and Services Tax (GST) if your annual revenues exceed $30,000. Once you reach that level, you will need to register your company with the Canada Customs and Revenue Agency, which will give you a number that you use to remit the difference between the GST that you collected on your sales and the GST that you paid on your purchases.

The same exemption threshold applies to the Québec sales tax (QST) and the same scenario applies to both registration and claims.

In Ontario, the situation is much more complicated. The general rule is that most goods and some services are taxable. However, certain exemptions are granted, e.g., for manufacturers and farmers. Therefore, each situation must be analyzed individually. If the self-employed worker's activities are taxable, he or she must be registered with the Ontario Ministry of Revenue and report the amount of the company's sales. An example of a taxable service would be auto repairs.

What expenses are tax-deductible from my income?

The rule is that all reasonable expenses are deductible if they are used to generate business income. Therefore, the self-employed worker can deduct many more expenses than an employee. For example, you can deduct:

• Home office expenses (business long distances, a portion of the mortgage interest and municipal taxes applicable to the office space, a portion of maintenance and repair costs). Note that in Québec, these expenses are only 50% deductible;
• Car expenses for business purposes (supported by a log of the kilometers used for business);
• 50% of meal charges taken with clients;
• Advertising expenses;
• Office supplies;
• Delivery, transportation and shipping charges;
• Travel expenses;
• Convention expenses (two per year);
• Business taxes;
• Accounting and legal fees;
• Bad debts;
• Interest charges;
• Employee salaries;
• Depreciation of a portion of the cost of long-term assets such as a car, office equipment and computer equipment.

You must save all of your receipts, since tax authorities can request them anytime in the seven years following filing of your income tax return.

Do I need to incorporate to be self-employed?

Not necessarily. Normally, you form a corporation when your business profits surpass your financial needs as a self-employed worker. If this is the case, the profits remaining in the corporation are taxed at a lower rate being more profitable than the individual tax rate, which is closer to 50%.

In Québec, it is important to determine right from the start if you wish to form a corporation. As a matter of fact, if certain conditions are met, a new corporation can be exempt from Québec income and capital tax for the first five years. However, the corporation is not eligible for the exemption if the individual previously ran the business. Therefore, you should be careful when planning the first steps of any new business.

Renseignements aimablement fournis par Odette Boudreault, CA. 450-652-0818