Entrepreneurship & Small Business

CRA penalty for being classified as an employee vs. contractor

  • Last Updated:
  • Feb 11th, 2019 11:18 am
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Mar 23, 2008
9749 posts
Homerhomer wrote:
Feb 11th, 2019 11:01 am
The OP stated he or she meets employer-employee conditions, it is very straight forward.
The rules are very simple, from cra:

https://www.canada.ca/en/revenue-agency ... _mpld_wrkr

Employee or self-employed worker?
It is important to decide whether a worker is an employee or a self-employed individual. Employment status directly affects a person's entitlement to employment insurance (EI) benefits under the Employment Insurance Act. It can also have an impact on how a worker is treated under other legislation such as the Canada Pension Plan and the Income Tax Act.
The facts of the working relationship as a whole decide the employment status.
In an employer-employee relationship, the payer is considered an employer and the worker an employee. Employers are responsible for deducting Canada Pension Plan (CPP) contributions, EI premiums, and income tax from remuneration or other amounts they pay to their employees. Employers must remit these deductions along with their share of CPP contributions and EI premiums, to the Canada Revenue Agency (CRA).
An employer who fails to deduct the required CPP contributions or EI premiums has to pay both the employer's share and the employee's share of any contributions and premiums owing, plus penalties and interest. For more information, go to Payroll.
And where in that document does it say that it's illegal to be in what's considered a PSB? And for that matter, considering the company (the employer) doing the "hiring" is a Japanese company with no Canadian presence, it seems irrelevant. If anything, they would be deducting based on Japanese tax laws, and the OP would have to file for world income.

This document is more relevant to the OP's situation:
https://www.canada.ca/en/revenue-agency ... rkers.html

Again... It's not illegal to be considered a PSB, as long as you pay your taxes and payroll deductions appropriately. It simply means you lose many of the deductions that a standard corporation would have.