Consultant working for a foreign company

[mitamata]

Hi all,

I recently immigrated to Canada (in BC), my husband sponsored me.
Here's the situation: I am working as a consultant for the company I used to work for back in Slovenia. I'm a programmer and can work anywhere as long as I have my laptop and internet access. My "business" is very simple, I don't really have any expenses with it as I work from our living room.

I could probably just pretend I don't work and not bother with taxes, but I don't want to take any chances and wish to do this right. So my question is: what do I need to? I haven't registered my business anywhere as I found no information on it, should I do that somehow? What records do I need to keep? I only get one income per month and that is the fee my former company pays me at the end of the month. They transfer money directly into my chequing account. I'll be happy to disclose my income, just wondering what I need as evidence of it. Do I have to issue a bill to the company every month or is the contract that states I get $X per month enough?

I'm kinda lost here really. Any guidence would help. I looked online, but everything I found was way too confusing. If anyone has any useful links, I'll be happy to read all the resources you can offer.

Thanks

 

[Chander]

Dear Mitamata,
You give the bill to the company and in the bill you elaborate yr expenses like convenyce alowence for movement to the company,stationery charges used for corespodence,refershment charges etc.After deducting such chrges from yr salery then you give TDS(tex deduction at source) on the balance and have statement from the company for yr record or to show to incom tex department at their requirement.I feel it will be more better if you higher incom tex lawyer to fill yr return.For any further information pls ask.
Chander

 

[max101]

Hi all,

I recently immigrated to Canada (in BC), my husband sponsored me.
Here's the situation: I am working as a consultant for the company I used to work for back in Slovenia. I'm a programmer and can work anywhere as long as I have my laptop and internet access. My "business" is very simple, I don't really have any expenses with it as I work from our living room.

I could probably just pretend I don't work and not bother with taxes, but I don't want to take any chances and wish to do this right. So my question is: what do I need to? I haven't registered my business anywhere as I found no information on it, should I do that somehow? What records do I need to keep? I only get one income per month and that is the fee my former company pays me at the end of the month. They transfer money directly into my chequing account. I'll be happy to disclose my income, just wondering what I need as evidence of it. Do I have to issue a bill to the company every month or is the contract that states I get $X per month enough?

I'm kinda lost here really. Any guidence would help. I looked online, but everything I found was way too confusing. If anyone has any useful links, I'll be happy to read all the resources you can offer.

Thanks

Hi Ms. mitamata, do you have any update on your situation? i have similar Situation. I have moved to Canada but I still work for my employer in the US. Do we need to register our company? Please update your status.

 

[Ra00]

I would also love to hear on this from seniors as i am also in the same situation.................

 

[max101]

I would also love to hear on this from seniors as i am also in the same situation.................

Ra00,
I am still researching on this topic. I tried to consult a Accounting consultant but the fees are $180 per hour !. that's just too much for me

Based on my research, I find the options could be:
1. Setup a Sole Proprietorship
2. Work as Independent Contractor

I think if we work as independent contractor, we don't need to register our business. I am more interested in that option at this time as I think setting up Sole Proprietorship would be more complicated. But I am still researching on these options..

 

[starzibal]

Ra00,
I am still researching on this topic. I tried to consult a Accounting consultant but the fees are $180 per hour !. that's just too much for me

Based on my research, I find the options could be:
1. Setup a Sole Proprietorship
2. Work as Independent Contractor

I think if we work as independent contractor, we don't need to register our business. I am more interested in that option at this time as I think setting up Sole Proprietorship would be more complicated. But I am still researching on these options..

I am an Accountant. I would recommend Limited Liability Company(LLC) its little bit expensive to open(fee to govt etc)but it can save you lot of hassles and work related issues. Don't go for sole prop. as it does not mean anything, you don't even have to file your taxes separately from sole prop. business you open. It will go in with your income. It has unlimited liability to you, business and personal assets are at risk.Some employee benefits such as owner's medical insurance premiums are not directly deductible from business income (only partially deductible as an adjustment to income). any many more tax related disadvantages. whereas limited liability corp.(LLC) has limited liab. if something goes wrong, your personal assets on stake in sole prop. whereas in LLC its not.

 

[max101]

What is the process of registering for LLC in Canada?. Seems like LLC does not exist in Canada. any suggestions?

 

[starzibal]

What is the process of registering for LLC in Canada?. Seems like LLC does not exist in Canada. any suggestions?

You are correct. LLC is for USA. Sorry about that, similar to that in Canada is LLP.

 

[TatianaRussia]

Mitamata, you have to disclose your income as self-employed income.
Your expenses are internet connection fee, rent of the home-office, computer amortization etc.

 

[Daunia]

Hi everybody,

my name is Daunia and I have a similar situation.
I don't think that u can open a company because u need a work permit to work in Canada. Basically u should wait to receive the Permanent Residence status.

If u have other information let us know please

 

[max101]

You can work as Self-Employed and file taxes as Self Employed. If your taxable (HST/GST) invoices are above $30K, then you may need to register for HST/GST. As I know, the service you bill to companies in foreign countries are not GST/HST taxable.

If you plan to find other local clients then you may also need to apply for business permit in your city. they may be additional fees for this.

If you are on track to grow as a business, then it would be good to consider Incorporation. But for a contractor working for one company, I don't think it's worth the hassle. You can try to limit your liability in the Contract Agreement with the Company.

I file my taxes using TurboTax.ca and enter my income as Self-Employment income. It has all the detail options to enter expenses such as telephone, internet, etc. It also generates the necessary form T2125 (Statement of Business or Professional Activities). The Tax Return is a bit complicated when you are Self-Employed, but you can get some benefits such as expenses deductions that lowers your income tax. Over the years I have seen that being Self Employed is a common practice.

 

[devjavu]

max101, Thanks for sharing your insight on this. My situation is pretty similar with me working from home in Canada for a foreign client over the internet.

I'm on an Open Work Permit (spouse) with my wife being the principal applicant. I have about 9 years experience in Computer games programming and want to branch out on my own here in Canada ( hence the consultancy instead of a job - which I can get without issues)

I have been suggested to go via the Incorporating a corporation with 2 Canadian partners ( I can't seem to do this on my own being as I'm on a OWP). My Open Work Permit (Spouse) seems to exempt the new Inc from seeking an LMO. You views on this? The added advantage of Inc that :
1. The Inc can engage with local clients as well as foreign.
2. I will be working for a Canadian employer. The suggestion is that it could work to my advantage when applying under Canadian experience for PR.
3. I'll be contributing to CPP, EI etc so it looks a bit more formal an engagement that being a Sole Proprietor- again from the PR

Disadvantages are - paperwork! additional upfront expenses! Estimate : CAD 550 - 800 for registration, accountant fees, payrolls , taxes etc...

My other option is to go via the Sole Proprietor route which has the issues of unlimited liability and difficulty in "proving experience". There are apparently some initial setup expenses there as well .

Your thoughts are very welcome !

 

[devjavu]

Bump !

 

[max101]

devjavu, Just few thought..

In my case, I work as a sub-contractor for consulting companies and I do not work directly for the end clients, So I am somewhat like an employee of those consulting companies. I had tried to work independently but it was too difficult. And my income is quite low to afford accountants and incorporation.

In your case, if there is potential to make good income then you can certainly consider to work with Accountants to setup Incorporation. I don't know about exact rules for Open work permit.

I contribute to CPP as sole proprietor. CPP is compulsory when I file my taxes. There may be few exceptions as described in following page:
http://www.servicecanada.gc.ca/eng/services/pensions/cpp/contributions/

EI is optional, but it is possible to participate for EI as well. The thing about EI is that once you receive any type of EI benefit, you have to contribute till the end of your career. So far I don't participate in EI.
http://www.servicecanada.gc.ca/eng/sc/ei/sew/cancelling.shtml

Regarding Liability, I try to limit liability in the contract documents by adding phrase like "In any case the maximum liability is $xx amount". I thought about Liability Insurance but that is also too expensive for me.

 

[devjavu]

devjavu, Just few thought..

In my case, I work as a sub-contractor for consulting companies and I do not work directly for the end clients, So I am somewhat like an employee of those consulting companies. I had tried to work independently but it was too difficult. And my income is quite low to afford accountants and incorporation.

In your case, if there is potential to make good income then you can certainly consider to work with Accountants to setup Incorporation. I don't know about exact rules for Open work permit.

I contribute to CPP as sole proprietor. CPP is compulsory when I file my taxes. There may be few exceptions as described in following page:
http://www.servicecanada.gc.ca/eng/services/pensions/cpp/contributions/

EI is optional, but it is possible to participate for EI as well. The thing about EI is that once you receive any type of EI benefit, you have to contribute till the end of your career. So far I don't participate in EI.
http://www.servicecanada.gc.ca/eng/sc/ei/sew/cancelling.shtml

Regarding Liability, I try to limit liability in the contract documents by adding phrase like "In any case the maximum liability is $xx amount". I thought about Liability Insurance but that is also too expensive for me.

Thanks for your reply! I'll leave a reply here for others who may find it useful.

I have spoken to a accredited tax consultant and he's helped me get me started - Sole Proprietorship operating under my own legal name - allowed under the conditions of my OWP (Spouse) .No need for spending money on Corporation (with Canadian partners) - you'll spend at least CAD $1500 - 2000 more each year maintaining this "separate legal entity". Especially if you are here temporary - it does not make much sense. I have now registered for a Business Number as Sole Proprietor with the CRA after explaining to them clearly my work permit & what my intentions were. They were happy to sort out my business number. They just asked me to call them back if I ever had Canadian clients - they'd need to register me for GST/HST. It's all done over the phone and sure smooth .

My tax consultant also put me through to a bank where I was able to open a Bank Account for my business. The business advisor at the bank took a detailed portfolio of my work history, nature of my work , percentage of work I would be doing "online" - 100% in my case. Also details on SIN number , work permit documents , business number (this was optional) . No need to register a "trade name". She explained clearly that banks treat such accounts as "Professional accounts" rather than "Business accounts". The later is more geared to serve people who set up say a shop / restaurant etc. Again , should I get Canadian clients I need to set up HST and they can help me with the accounting for that.

Taxes and CPP will be filed after 31 Dec 2014 ( for Year 2014).My Tax consultant asked me to get in touch with him around August to have a talk about any liable taxes. Eligible expenses are - internet, phone bills. small deduction for home office ( a part of the rent) which can be charged as tax free expenses. All that will get account by the end of the year

Thanks all!

I am now ready to engage with my foreign client companies.