How do you set up as a Canadian contractor for a US company?

The situation

You're a Canadian. A US company wants to pay you for your work. They've offered a contractor arrangement — no employment, no benefits, no payroll taxes handled on their end. You invoice, they pay.

This is a very common arrangement. It's also one where the administrative setup matters more than the candidate usually realizes. Done well, it's clean and tax-efficient. Done badly, it creates problems with CRA, with IRS, and with cash flow.

This page walks through the setup. This is general information, not tax advice. Talk to a Canadian accountant before finalizing anything.

The two structures

You can invoice a US client two ways.

1. As a sole proprietor. You, personally, invoice and get paid. Simplest. Income is added to your personal tax return as self-employment income.
2. Through a Canadian corporation. You incorporate (federally or provincially), the corp invoices, and you pay yourself via salary or dividends. More complex. Tax-deferral benefits at certain income levels.

For most Canadians billing under $80K to $100K/year from a single US client, sole proprietorship is simpler and the net tax cost is similar. Above that, and especially if you have 2+ clients, incorporation starts to make sense. Ask an accountant.

The W-8BEN (or W-8BEN-E) form

The US client will almost certainly ask you to fill out one of these before they pay you.

• W-8BEN — if you're invoicing as an individual (sole prop).
• W-8BEN-E — if you're invoicing through a Canadian corporation.

This form tells the IRS you're a non-US person, and it claims treaty benefits under the Canada-US tax treaty so that the US doesn't withhold tax on your payments.

Without it, the US client is legally required to withhold 30% of your invoices and remit to the IRS. You'd have to get that back through a US tax filing — painful.

Fill it out once per client. They'll keep it on file.

GST/HST considerations

Services provided to a non-resident (US company) from Canada are generally zero-rated for GST/HST — meaning you don't charge GST/HST on the invoice. Good.

But you still have to register for GST/HST once your cumulative revenue crosses $30,000 in any 4 consecutive calendar quarters. Once registered, you can also claim input tax credits (ITCs) for GST/HST paid on business expenses.

Most contractors billing US clients register voluntarily even under $30K to claim ITCs. Registration is free; filing is quarterly or annually depending on volume.

Setting up the invoicing

Simple setup for sole proprietors:

1. Open a separate chequing account for business income and expenses. Don't mix personal and business.
2. Register a business number with CRA if needed for GST/HST.
3. Use an invoicing tool — QuickBooks, FreshBooks, Wave, or just a Google Doc template. The tool matters less than the consistency.
4. Invoice on a predictable schedule — monthly is standard. Put payment terms on the invoice (Net 15, Net 30).
5. Track every invoice — invoice number, date sent, date paid, amount, currency.

Getting paid in USD

Three common ways.

1. Wise (formerly TransferWise) or Revolut. You get a US bank account number; the client pays in USD; you convert to CAD at near-wholesale rates. Best option for most individual contractors.
2. Direct USD bank account at a Canadian bank. Slow, expensive conversion. Only recommended if you already have one.
3. Pay-out through a platform (Deel, Remote.com, Oyster, etc.). The US client handles compliance; you get paid in CAD or USD. Easy but a layer of fees.

For regular USD income, Wise is almost always the cheapest path.

Tracking your income and expenses

You're running a business, even if it's just you. CRA expects proper bookkeeping.

• Income: every invoice, in the currency invoiced, with the date paid (not the date invoiced).
• Expenses: anything legitimately required for the work — home office portion, internet, software subscriptions, professional fees, equipment.
• Currency conversion: Income in USD must be reported in CAD on your tax return. Use the Bank of Canada exchange rate on the date you received the payment (or the annual average, if your accountant prefers).

Taxes as a Canadian contractor

You pay Canadian income tax on your net self-employment income, at your marginal rate. You also pay both halves of CPP (Canada Pension Plan) — 11.9% as of 2026, up to the CPP max (YMPE). As an employee you'd pay only half.

Rough rule of thumb: set aside 30% to 35% of every payment for tax + CPP. Keep that in a separate account. CRA payments are due quarterly (installments) once you're past the first year of self-employment.

For incorporated contractors, the math is different — salary vs. dividend splits, corporate tax rates, etc. This is where an accountant earns their fee.

The tax treaty: what you actually owe where

Under the Canada-US tax treaty, most Canadian residents providing services to US clients from Canada owe:

• Canada: full tax on the income (personal or corporate).
• US: nothing, provided the work is done in Canada and the W-8BEN is on file.

If you travel to the US to work on-site, or if the client structures the arrangement as employment, this gets more complicated. Stay in Canada for the actual work, and the treaty is clean.

Contractor vs. employee: watch the line

CRA has specific tests for what counts as a true contractor vs. an employee-disguised-as-contractor. If the relationship looks like employment — set hours, no other clients, client provides equipment, client sets the work — CRA can retroactively reclassify you as an employee, which creates major tax and CPP issues.

To stay clearly on the contractor side:

• Have more than one client, or at least pursue other clients.
• Set your own hours.
• Use your own equipment.
• Invoice on defined deliverables or milestones, not hours worked like a timesheet.
• Have a written contractor agreement that reflects the actual relationship.

Contracts to have in place

Before the first invoice, you want a written agreement with the US client covering:

• Scope of work.
• Payment terms (amount, schedule, late fees).
• IP ownership.
• Confidentiality.
• Termination notice.
• Jurisdiction (which country's courts govern the contract — usually theirs).

Most US clients will send you their standard template. Read it. Push back on anything that looks abusive — "work for hire" clauses are standard, but "non-compete for 2 years post-termination" is often negotiable.

When to incorporate

The rough threshold: incorporating makes sense when your contractor income is consistent and above $120K to $150K/year and you don't need all of it for personal spending. Below that, sole proprietorship is usually simpler and nearly tax-equivalent.

Incorporating costs $1,000 to $2,000 to set up, another $1,500+ per year in accounting, and adds paperwork. The tax deferral benefit needs to cover those costs.

Talk to an accountant before deciding.

What to avoid

• Mixing personal and business accounts. Creates bookkeeping hell at tax time.
• Not setting aside tax. The first tax bill as a contractor is brutal if you haven't saved.
• Not filing GST/HST once you pass $30K. CRA penalties compound.
• Taking the client's "we'll just 1099 you" arrangement literally. A 1099 is a US tax form that doesn't apply to you. You need a W-8BEN on file; you don't get a 1099.
• Ignoring the contractor-vs-employee tests. If CRA reclassifies you, it's expensive.

The bottom line

Contracting for a US company from Canada is a clean, common, tax-friendly arrangement — if you set it up right. W-8BEN on file, separate business account, GST/HST registration when you pass $30K, 30% to 35% tax set aside, Wise for USD receipts, proper contract in place. At higher income levels, talk to an accountant about incorporating. Get the setup right once and the day-to-day is straightforward.