A simple question. Can a US taxpayer subcontract a Canadian-based
1) person, or
2) coproration
who reside and pay taxes in Canada?
Other than invoices, is there any paperwork or forms?
Subcontracting to Canada
Moderator: Mark T Serbinski CA CPA
As long as the work is performed IN Canada, this is not a problem for either of you.
For him to do work in US however, he would need work status, otherwise both of you would be committing immigration violations.
For him to do work in US however, he would need work status, otherwise both of you would be committing immigration violations.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
One other thing to keep in mind. If the work is being performed **in** Canada, the Canadian customer is required to withhold 15% under Reg 105 and remit it to Canada Revenue Agency. This must happen regardless of whether it is YOU or the Canadian subcontractor who are providing the services.nelsona wrote:As long as the work is performed IN Canada, this is not a problem for either of you.
For him to do work in US however, he would need work status, otherwise both of you would be committing immigration violations.
If you qualify under the Treaty, you will not have to pay tax in Canada and can get it refunded by filing a non-resident Canadian tax return. Note, if you operate through a corporation and meet the definition of "carrying on business in Canada" (i.e. more than just occasional work), you are **required** to file a T2 corporate return. There is a $2,500 penalty (up to) for late filing the return.
If you operate as a self-employed individual, you must technically file a Canadian personal tax return to claim the Treaty position, though there is no penalty for not doing so unless there is tax payable.
Thank you, Carson, it is vice versa, I work in US and I have extra software projects from my company here that I would be able to take over and partially pass to my Canadian subcontractor. He will do the job for me, in Canada, sending me the code by email. The work is real.
The question is - what do I need oficially to keep, in order to prove subcontracting expenses?
Bank transactions, emails, his invoices? Do I need to issue him any tax related forms?
The question is - what do I need oficially to keep, in order to prove subcontracting expenses?
Bank transactions, emails, his invoices? Do I need to issue him any tax related forms?
I'd keep all you listed. I'd have to look up if there are any US filing requirements, probably a 1042-S (non-resident 1099) or the like since no work is being done in the US. You'll have to look it up on the IRS website.ususer wrote:Thank you, Carson, it is vice versa, I work in US and I have extra software projects from my company here that I would be able to take over and partially pass to my Canadian subcontractor. He will do the job for me, in Canada, sending me the code by email. The work is real.
The question is - what do I need oficially to keep, in order to prove subcontracting expenses?
Bank transactions, emails, his invoices? Do I need to issue him any tax related forms?
Thanks again. I think that subcontracting from US to Canada is much more transparent than subcontracting to India for example which takes place a lot.
I have one more question - where and in which category these expenses must be reported on the income tax, are they called 'subcontracting' or 'consulting' or other type? The nature of the services is software development (often called computer consulting).
I have one more question - where and in which category these expenses must be reported on the income tax, are they called 'subcontracting' or 'consulting' or other type? The nature of the services is software development (often called computer consulting).