Tax Requirements for the Gig Economy in Canada
The Canada Revenue Agency (the “CRA”) requires all taxpayers to file income tax returns every year. Since Uber, and other similar companies, have arrived on the scene there have been questions about the tax implications of working for a company in the gig economy like Uber.
Status of Uber Drivers
The CRA considers Uber drivers to be self-employed, or independent contractors. As far as the ride-sharing companies are concerned, you are the owner of a separate business that it uses to provide driving services.
So, drivers follow similar rules to all other self-employed individuals. Importantly, this means that Uber drivers do not receive T4 slips from Uber. Rather, Uber drivers are responsible for paying their income tax by the regular tax filing deadline. This is the case because Uber does not deduct taxes from the income made by Uber drivers throughout the taxation year.
Tax Structure of Working in the Gig Economy
Beginning July 1, 2017, for Uber drivers, federal and/or provincial taxes are added to fares when clients book a ride. Thus, drivers must register for a GST/HST account within 30 days of their first trip. For drivers in Quebec, you must also have a GST number before you can begin providing services to clients.
The “Small Supplier” exception was forced to change upon the creation of Uber jobs. Before July 1, 2017, only drivers who made $30,000 per year or more had to charge and remit GST/HST. That said, because of Uber, Lyft, and other similar companies, the CRA implemented new rules. The CRA was forced to amend/change the GST/HST definition of “taxi business” in the Excise Tax Act.
So, Uber drivers must register for a GST/HST account, regardless of income. Uber drivers must also charge and collect GST/HST for all fares, report these amounts on their income tax return, and remit the GST/HST charged to the CRA.
In Quebec, Uber collects and remits QST and GST for drivers. In the rest of Canada, Uber collects GST/HST automatically from clients and transfers it to the drivers weekly. Thus, drivers must remit these amounts to the CRA on their own. Uber provides its drivers with their tax information in their “Uber profile”. Tax summaries are available in the app’s profile which provides information on total earnings and other tax information.
Deducting Business Expenses in the Gig Economy
Since drivers are independent business owners, most, if not all, money spent on deriving income from the ride-sharing services can be considered tax deductible expenses. The significant expense for drivers is the actual use of the vehicle. Uber drivers can deduct the actual expenses of operating a vehicle for business including gas, oil, insurance, maintenance, repairs, depreciation of the car or lease payments.
If your vehicle is used for ride-sharing purposes and personal transportation, then you should be careful only deduct the portion of your expenses that apply to business use. More importantly, whatever deduction you claim, it is imperative that you keep thorough records to support your claims. The CRA is always liable to scrutinize taxpayer return filings, so you should keep receipts, mileage logbooks, or any other documentation that support the expenses you are claiming as deductions.
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.