As a freelancer in Canada, you need to be aware of the rules and considerations to paying sales taxes on your services. These rules do not apply to every situation and are different in every province. For example, if you are rendering a service to a client in another province from where you live, you need to apply the rates of that province. Being a freelancer or independent professional is like having your own small business, make sure you comply with CRA and the local Revenue tax ruling.
Does a freelancer need to collect and charge Sales taxes in Canada?
If you are a freelancer, you are generally required to register with the CRA and charge GST/HST if your total worldwide revenues from taxable revenues exceed CAD $30,000 in a calendar year over the last four calendar quarters in a row or in any single quarter. However, even if you don’t meet this threshold, you can voluntarily register for GST/HST to take advantage of input tax credits (ITCs) and recover the GST/HST you pay on business expenses.
Pay attention that Manitoba and British Columbia have a smaller threshold of $10,000 to start requiring to collect provincial taxes. And there is no exemption in Saskatchewan. All freelancers need to register and collect sales taxes.
Who do you need to charge Sales taxes?
Any customer to whom you have performed services is required to pay Sales taxes. However, it’s important to determine the place of supply for your services to determine whether you need to charge GST/HST. Generally, if your services are supplied to a client outside Canada, they are considered an export and not subject to GST/HST.
Sales taxes vary by Provinces, so it is important to charge the correspondent sales tax of your customer place of business.
There are three types of sales taxes in Canada: PST/QST, GST and HST and every Province have their own rates that can vary from 5% (Alberta) to 15%
How to calculate?
The safest bet is to use the CRA calculator hosted on their page to make sure you don’t miss any tax and always have the most relevant and updated information to charge your clients.
Here are the different rates by Province/Territory as of June 2023:
|Province/Territory||Type||GST (%)||PST (%)||Total rate (%)|
|British Columbia||GST + PST||5||7||12|
|Manitoba||GST + PST||5||8||13|
|Newfoundland and Labrador||HST||5||10||15|
|Prince Edward Island||HST||5||10||15|
|Quebec||GST + QST||5||9.975||14.975|
|Saskatchewan||GST + PST||5||6||11|
How to register and remit sales taxes when you are a freelancer?
Once your revenue exceeds the minimum required by the Province, you will need to register with CRA to receive a business number and with Revenu Quebec, if your residence is in Quebec. This does not mean you need to incorporate. The agency will then assign you a reporting period during which you file your tax returns. The registration date will determine the reporting period.
Sales taxes for small businesses and therefore freelancers (revenues of less than Cad $1.5 million) must be filed and paid annually but you can choose to file them monthly or quarterly.
How to report and file Sales taxes for you freelance business?
Sales taxes must be collected with every invoice and that information needs to be clearly stated. These are important information that is required to be on every invoice to your clients:
- Your full name
- Sales tax Registration number for each type (if you are required to collect Sales taxes)
- Address of business
Using an Invoice generating application will help make sure you have all the required information. In general, you might need to retain your books and records for six years after the end of the year to which they are related.
Also add a note here that you are not responsible for the information provided. I forget how to say that.
Disclaimer: It’s crucial to consult with a tax professional or contact the Canada Revenue Agency directly for specific guidance tailored to your situation. Tax regulations can be complex, and professional advice can help ensure you comply with all the necessary requirements.