Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to becoming an independent contractor, you should seek professional assistance (e.g. make a post on Dynamic Lawyers). We have Ontario business lawyers in this regard.
So you’ve just started out as an independent contractor and the question comes up: what should I do about GST?
GST or “Government Sales Tax” is the tax that applies to the supply of most goods and services in Canada. The rate is currently 5%.
Businesses are required to collect GST and remit it to the government.
According to the CRA, businesses are required to register for GST if they no longer qualify as a small supplier because their worldwide taxable supplies of goods and services exceed the small supplier limit of $30,000 in a single calendar quarter or in four consecutive calendar quarters.
So if you qualify as a small supplier, why would you bother to collect and remit GST? Well, if in four consecutive calendar quarters, you believe that your worldwide taxable supplies of goods and services will exceed the small supplier limit of $30,000, then you’ll have to remit GST. If you never registered prior to reaching that limit, then you won’t be able to reduce your GST liability through allowable business expenses (which are eligible for input tax credits). Remember: you only remit to the government your net GST (i.e. GST collected minus total input tax credits).
Once you become a GST registrant, you are responsible for collecting GST from your customers on all taxable goods and services you sell or supply in Canada. To this end, your responsibilities include:
- Informing your customers that GST is payable (e.g. on invoices, receipts, contracts, etc.)
- Collecting GST and holding in trust until you remit it to the CRA;
- Maintaining proper books and records (if you want to destroy your records before keeping them at least 6 years after the year end to which they relate, then you have to get written approval from the CRA);
- Calculating your net tax; and
- Filing your returns on time.
For more information on GST, visit the CRA’s website on that topic here.
In case you’re a Client and looking to engage the services of an Independent Contractor in Ontario, look no further:
Independent Contractor Agreement (Client) – No Schedules
This Agreement can be used by a Client who wants to engage the services of an Independent Contractor (e.g. a consultant, a professional, a general worker, etc.) without creating an employment relationship. The “Client” means that this Independent Contractor Agreement favours the Client – for example, through notice, termination, standards of care, and restrictive covenants, etc. The “No Schedules” means that there are no schedules in this particular Independent Contractor Agreement – although some have a Statement of Work or Description of Work, etc. This one does not. There will be different versions of this agreement which favour both the Client and the Independent Contractor and which may include Schedules. Schedules aren’t absolutely necessary. They’re just one way of having an agreement instead of writing things out in the actual agreement, you simply modify the Schedule. Here’s the sample Video Guide that comes with this Independent Contractor Agreement (Client) – No Schedules:
All of Dynamic Lawyers‘ legal forms are lawyer-prepared, simple to read, easy to customize, and only a fraction of the price a lawyer would charge. Also, each legal form comes with a FREE VIDEO GUIDE (watch a useful example of how this legal form can be customized), a FREE DL GUIDE (read helpful information about this legal form), and another FREE DL GUIDE that sheds valuable insight into how legal forms can be challenged. What are you waiting for? Best of all, if you DO need a lawyer and need some legal advice, simply make a post and get FREE quotes from Ontario lawyers focusing on the area of law you require!
