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Hi Allan,
Me and my wife have recently moved to Canada from India and our previous employer in US wants to continue with us as consultants. They asked us to send the invoice and will pay us in Canadian dollars but they do not have any Canadian entity. I wanted to know the best way forward in this case. Registering a company or working as self employed?
Thanks,
Rajiv
Hi Rajiv,
Your best option is to open a Canadian corporation. Then have your Canadian corporation send invoices to the American customer for services rendered. The American customer will make payment to your Canadian corporation's bank account (can be in USD or CAD $). In this way, your Canadian corporation will be taxed on its income (less expenses) at a rate of only 13.5%. In addition, your US client will not need to worry about Canadian tax filings.
However, you must ensure that you are truly acting in the capacity of an independent contractor and not an employee. Otherwise, your Canadian corporation could be classified as a Personal Services Business and taxed at a very high rate.