Being an independent contractor in Canada gives you more control over your work — but it also comes with unique tax rules, legal risks, and limits on your rights. Whether you’re a freelancer, consultant, gig worker, or self-employed professional, it’s important to understand how contractor status works and what your legal entitlements are.
This guide explains, in simple terms:
- What an independent contractor is in Canada
- How contractor taxes work
- What you can write off as an independent contractor in Canada
- Your rights if you’re misclassified as a contractor
What Is an Independent Contractor in Canada?
An independent contractor is a self-employed individual who provides services to a business but isn’t an employee. Instead, contractors operate their own business and have more control over how they do the work.
Common examples include:
- IT consultants
- Freelance designers or writers
- Truck drivers
- Real estate agents
- Gig workers (e.g., Uber, DoorDash)
- Skilled trades and construction workers
Key features of a true contractor relationship
A person is generally an independent contractor if they:
- Control how, when, and where they perform the work
- Can hire subcontractors or assistants
- Provide their own tools or equipment
- Take on financial risk
- Invoice for services
- Work with multiple clients
- Don’t have supervision like an employee
If a company controls your schedule, closely manages your work, or disciplines you, you may actually be an employee — even if your contract says otherwise.
💡 Misclassification is extremely common in Canada. If a company treats you like an employee but calls you a contractor, they may owe you full employment rights, including severance pay.
How to File Taxes as an Independent Contractor in Canada
Contractors are responsible for handling their own taxes. Here’s what that means in practical terms:
1. Report your income as self-employment income
You’ll file your taxes using:
2. Pay CPP contributions
Because you’re self-employed, you pay both the employer and employee portions of CPP.
3. Track your expenses
You can deduct many business-related costs (more below).
4. Charge and remit GST/HST
You must register for GST/HST if you earn more than $30,000 in a 12-month period.
5. Keep good records
Store invoices, receipts, mileage logs, contracts, and bank statements in case of audit.
💡 If you were misclassified as a contractor, the CRA may determine that the company — not you — owes the unpaid CPP, EI, and tax amounts.
What Can You Write Off as an Independent Contractor in Canada?
One of the biggest advantages of contractor status is the ability to deduct business expenses.
Here are the most common write-offs in Canada:
Home office expenses
- Rent or mortgage interest (proportionate)
- Utilities
- Internet
- Property taxes
- Home insurance
Vehicle expenses
- Fuel
- Maintenance and repairs
- Insurance
- Lease payments
- Parking
Work-related costs
- Tools and equipment
- Software subscriptions
- Phone and data plans
- Professional fees
- Office supplies
- Marketing or advertising
- Travel and meals with clients
Training & development
- Courses
- Certifications
- Workshops
You can only write off expenses that are reasonable and directly connected to running your business.
Benefits and Risks of Being an Independent Contractor in Canada
Benefits
- Flexibility and control
- Ability to choose clients
- More tax deductions
- Higher earning potential in some industries
Risks
- No EI, vacation pay, or benefits
- No automatic severance if work ends
- You pay more CPP
- Greater financial risk
- Must manage taxes and expenses
Are You Actually an Employee? (Misclassification in Canada)
Many Canadian receive the label “independent contractors” when they’re actually employees. When that happens, you should get full employment protections, including:
- Severance pay in Canada (up to 24 months in many cases)
- Wrongful dismissal compensation
- Human rights protections
- Minimum wage, breaks, and overtime
- Vacation and holiday pay
Signs you’re misclassified
You may be an employee if:
- The company sets your hours
- You can’t refuse work
- You report to a supervisor
- You work full-time for one business
- You use company equipment
- You can receive discipline
Independent Contractor vs. Employee in Canada
Main differences at a glance:
| Topic | Independent Contractor | Employee |
|---|---|---|
| Control | High control over work | Employer controls work |
| Tax | Handles own taxes & CPP | Employer deducts tax, CPP, EI |
| Benefits | No benefits | Eligible |
| Severance | None (unless misclassified) | Yes |
| Tools | Provides own tools | Employer provides |
| Risk | Contractor bears risk | Employer bears risk |
Independent Contractor Rules by Province
Independent contractor laws are similar across Canada, but there are important differences in each province — especially when it comes to employment standards, termination rights, and tests we use to determine whether someone is truly self-employed.
If you need province-specific guidance, see our detailed regional guides:
- Independent Contractor Ontario
- Independent Contractor Alberta
- Independent Contractor British Columbia
When to Talk to an Employment Lawyer
If you believe you’re misclassified, your rights are being denied, or told you “can’t get severance because you’re a contractor,” contact us before signing anything.
Your employer may owe you:
- Significant severance pay
- Proper employment classification
- Compensation for lost wages or benefits
For most severance negotiations, we operate on a contingency fee basis, meaning you don’t pay unless we win.
📞 Call us at 1-855-821-5900, email help@employmentlawyer.ca, or use our online form for a consultation.