Freelance jobs in Canada
According to statistics, the self-employed on average earn about $40,000 to $50,000 CAD per year and pay less tax than regular workers.
You have probably noticed that there are a lot of self-employed people everywhere nowadays. But few people talk about the financial side of this activity, although freelancers, like all other workers, are obliged to report their income to the state and pay taxes.
Who are freelancers anyway? They are self-employed people who work under contract for one company or several companies and pay their own taxes. They can be journalists who write articles for news agencies, photographers or taxi drivers. According to statistics for 2018-2020, about 15% of Canadians worked for themselves. I'm sure that number has increased during the pandemic.
I will talk about the legal side of self-employment in Canada, taxes and how to immigrate as a freelancer.
Canada has great conditions for the self-employed, now find out why. Also, if you freelance in your home country, you may be able to immigrate to Canada under the self-employment program later on.
Self-Employment in Canada
You do not have to register a business or start a company to be self-employed in Canada. You can simply bill customers in your name and receive money into your personal bank account. Even though I have a separate company, I still receive part of my income as a self-employed person.
Do freelancers have to pay taxes? Of course they do. As soon as you start earning extra income, you are required to report it to the Canada Revenue Agency, or more simply, to the IRS. Even if you earned $10 or $50 CAD and did not report it, you are already evading taxes. It is unlikely that you will be caught, but it is not advisable to take the risk.
Canada has a trust form of filing tax returns. This means that declaring income is a personal matter for the taxpayer. You calculate how much you've earned and how much you have to pay the government yourself. But if you are caught once in violation, then you will be checked your whole life, not to mention the fines.
All employed Canadians have to file a tax return once a year by April 30. The deadline is longer for self-employed people, but you have to pay your taxes by that date. On your tax return, you have to fill out many fields that show not only your income but also your expenses. After all deductions, it will be clear what your annual income is and how much tax you have to pay.
Canadians usually hire an accountant or tax preparer to fill out their tax returns. Yes, in recent years there is a lot of software for filing taxes, I tried to use the most popular, but I do not like it. For me it is more convenient to calculate everything in regular tables and then send them to accountant.
Taxes for the self-employed
Probably the most important question is: What are the taxes in Canada for freelancers or just the self-employed? Usually, any workers have to set aside about 25% of their income for taxes. Or even more, if their income is high. A lot more depends on the province where you live. I think residents in many countries are now shocked by these numbers, but wait, it's not all that bad. Only net income is taxed. That is, total income minus all expenses.
You can deduct any reasonable expenses related to your business. These, too, are shown on the declaration. For example, you work from home, you have a separate room to work in, which takes up, for example, 20% of the area. This means that you can deduct 20% of your household expenses on your tax return.
You can also declare expenses for:
- the printer and the paper;
- office supplies;
- cell phone;
- trips, such as to conferences;
- costs for heating, water, home insurance, property taxes;
- interest to the bank on the mortgage for the home.
If you are a photographer, for example, and go to shoots by car, then you can write off the cost of the car, oil changes, petrol, and so on. In general, everything that relates to work. If you take it all away, then the taxes you will pay a lot less. Don't forget that employees in employment also pay for internet, mortgage and so on, but they can't deduct this from their income.
By the way, please note that personal use cannot be declared. For example, if you use the home internet only 20% of the time to do your work, you can only declare 20% of your internet bill.
And keep every receipt and bill throughout the year. When it comes time to file your tax return, it's much easier to list your expenses with all the documents in hand. Especially since the IRS requires you to provide proof of all expenses that are on the return.
Another important point: When you make up to $30,000 CAD per year, you only have to bill clients for your services. For example, if your services cost $100 CAD, then clients should pay $100 CAD. But when your earnings from self-employment exceed $30,000, you have to register a number for additional sales tax. It's kind of like a surcharge tax. In this case, the customer has to pay you $113 to the province of Ontario instead of $100. The $13 you then have to remit to the government.
Once you start earning a decent income, the government will ask you to pay your taxes up front. But after you file your tax return, you only have to pay what you are missing. If you did not earn any income, the overpayment will be refunded.
I highly recommend working for yourself in Canada, then you can easily show expenses of thousands and tens of thousands of dollars and reduce taxes.
Immigration for the self-employed
Canada has a separate program for the self-employed that has very simple conditions. All you have to do is have two years of self-employment experience, a high school education, average English, make a plan to grow your business in Canada, and score 35 out of 100 on the scorecard. Scores are scored very easily, almost anyone can pass there.
It is true that the programme has two serious drawbacks. It is suitable only for those who are engaged in creative activities, such as journalists, designers, photographers, and so on, or in sports — coaches, athletes, and dancers. And the second disadvantage is that Canada takes a very long time to process applications for this program. Now the average waiting time is 35 months.
If you need help with immigration, contact our legal Canadian company. Our immigration consultants will find the right program and help with the paperwork.
Alex Pavlenko, Founder of Immigrant.Today
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