My friend is a Canadian citizen living in Canada providing services via phone and internet to an American Company located in the States. She is working as an independent contractor. So basically she calls into the States from Canada and the company cuts her a cheque in American dollars which they mail to her. (This is the first time they've used a Canadian's services).
Question #1: On the invoices she submits, should she be charging GST because she's providing the service from Canada? If so, she's already submitted one invoice and been paid but did not include GST, how does she rectify this? #2: When she deposits the cheque into her account, what does she have to be aware of in terms of the exchange rate? (she gets paid every two weeks so there's probably an additional income on the exchange of over $200) and finally, #3 Will she only have to pay taxes to Revenue Canada? Thanks in advance for any advice. RobinM
Cdn providing services to US for Amer co.
Moderator: Mark T Serbinski CA CPA
On the excahnge rate: she should be recording her income in Canadian dollars, since this is what she will be reporting to the CRA.
CRA doesn't care to know US dollar figures.
At year-end she adds up all her US dollar payments, and uses a lump excahnge rate, ie. $40,000US at 1.17 (or whatever the average was over the period) and reports THAT figure on her taxes.
<i>nelsona non grata... and non pro</i>
CRA doesn't care to know US dollar figures.
At year-end she adds up all her US dollar payments, and uses a lump excahnge rate, ie. $40,000US at 1.17 (or whatever the average was over the period) and reports THAT figure on her taxes.
<i>nelsona non grata... and non pro</i>
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote"><i>Originally posted by RobinM</i>
My friend is a Canadian citizen living in Canada providing services via phone and internet to an American Company located in the States. She is working as an independent contractor. So basically she calls into the States from Canada and the company cuts her a cheque in American dollars which they mail to her. (This is the first time they've used a Canadian's services).
Question #1: On the invoices she submits, should she be charging GST because she's providing the service from Canada? If so, she's already submitted one invoice and been paid but did not include GST, how does she rectify this? #2: When she deposits the cheque into her account, what does she have to be aware of in terms of the exchange rate? (she gets paid every two weeks so there's probably an additional income on the exchange of over $200) and finally, #3 Will she only have to pay taxes to Revenue Canada? Thanks in advance for any advice. RobinM
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To add to what Nelson has said, generally, there is no GST charged to non-resident clients, so she doesn't have to worry. A significant exception is where the services are related to "real property in Canada". An example of this is say a Canadian interior decorator doing work for a US architect who is working on a Canadian project. A little obscure to be sure, but an issue I recently dealt with. Also, GST would be charged if the work was done for a Canadian branch office of a US company. That doesn't seem to be the case here.
There will be no US tax consequences for your friend in this case.
Regards,
CRH
My friend is a Canadian citizen living in Canada providing services via phone and internet to an American Company located in the States. She is working as an independent contractor. So basically she calls into the States from Canada and the company cuts her a cheque in American dollars which they mail to her. (This is the first time they've used a Canadian's services).
Question #1: On the invoices she submits, should she be charging GST because she's providing the service from Canada? If so, she's already submitted one invoice and been paid but did not include GST, how does she rectify this? #2: When she deposits the cheque into her account, what does she have to be aware of in terms of the exchange rate? (she gets paid every two weeks so there's probably an additional income on the exchange of over $200) and finally, #3 Will she only have to pay taxes to Revenue Canada? Thanks in advance for any advice. RobinM
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
To add to what Nelson has said, generally, there is no GST charged to non-resident clients, so she doesn't have to worry. A significant exception is where the services are related to "real property in Canada". An example of this is say a Canadian interior decorator doing work for a US architect who is working on a Canadian project. A little obscure to be sure, but an issue I recently dealt with. Also, GST would be charged if the work was done for a Canadian branch office of a US company. That doesn't seem to be the case here.
There will be no US tax consequences for your friend in this case.
Regards,
CRH
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote"><i>Originally posted by MaggieA</i>
Shouldn't Robin's friend likely also be paying installments to CRA?
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Probably.
Carson
Shouldn't Robin's friend likely also be paying installments to CRA?
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Probably.
Carson
While installment payments are not mandatory in the first year of such an income arrangement, it would be wise for 30-40% of income to be put aside for taxes and CPP/EI, to avoid sticker shock next spriong.
But, after this year, if/when CRA sees that the income is not subject to normal withholding mechanisms, they will put her on an installment plan themselves, and quarterly payments not made will be subject to interest throughout the year.
<i>nelsona non grata... and non pro</i>
But, after this year, if/when CRA sees that the income is not subject to normal withholding mechanisms, they will put her on an installment plan themselves, and quarterly payments not made will be subject to interest throughout the year.
<i>nelsona non grata... and non pro</i>
Thanks to all of you for your advice. In the meantime, I've thought of some additional questions. #1 Say this friend deals only with the American company in the States for all of 2006, now eventhough she does not charge GST, shouldn't she still register for a GST account so she can claim back ITC's for such things as phone and computer/internet? AND #2. Suppose during 2006, she also contracts herself out to a Canadian company providing the same services here in Canada (charging them GST/HST, where applicable)in addition to the American company. At some point during 2006, she grosses combined revenues of $30,000+ from the two companies, would she have to register for a GST/HST account because her revenue from worldwide sources exceeds the $30,000 threshold? (eventhough the revenue generated from the Canadian company is under $30,000?) Thanks again
RobinM
RobinM
Does your friend have a computer? Maybe she could ask these questions?[:D]
If she charges GST, she MUST have a GST #, otherwise she is not legally collecting GST. she can't collect GST and then later on, if she meets some other criteria, get a number. The Cdn firms she is dealing with won't pay GST without getting her number either.
If she wants to claim refunds of GST (whether or not she collects any), she also needs a GST #.
<i>nelsona non grata... and non pro</i>
If she charges GST, she MUST have a GST #, otherwise she is not legally collecting GST. she can't collect GST and then later on, if she meets some other criteria, get a number. The Cdn firms she is dealing with won't pay GST without getting her number either.
If she wants to claim refunds of GST (whether or not she collects any), she also needs a GST #.
<i>nelsona non grata... and non pro</i>
Yes indeedy, Nelson, she surely does! Shucks, I just thought I'd kill two birds with one stone. If the various tax considerations of this type of a work arrangement can be addressed so there are no surprises at the end of the year, then perhaps I'll sign on with the company as she's been urging I do. At the same time, I want to make sure she's covered come tax time by passing along your sage advice. So, if you would be so kind, could you, or any of our fellow posters, please respond with any helpful advice you may have regarding my previous posting concerning combined revenues from American and Canadian sources. Thanks again )
RobinM
RobinM
The $30K threshold is based on worldwide revenues, not just revenues subject to GST.
As I expalined earlier, she will need a GST number from day one -- it's to her advantage.
How 'bout killing a whole flock of birds ... by having you and your friend go to the GST website
http://www.cra-arc.gc.ca/tax/business/t ... enu-e.html
<i>nelsona non grata... and non pro</i>
As I expalined earlier, she will need a GST number from day one -- it's to her advantage.
How 'bout killing a whole flock of birds ... by having you and your friend go to the GST website
http://www.cra-arc.gc.ca/tax/business/t ... enu-e.html
<i>nelsona non grata... and non pro</i>