Business Rules – IT Contractors and Consultants

Do you provide IT services on a consultancy basis? You need to understand how the personal services you offer as a consultant or contractor are
subject to taxes. Personal services business rules have changed which is why it’s very critical to know if the CRA will consider your business as a PSB.

With the new personal services business rule, you will not be able to take advantage of the small business deduction which usually helps corporations to save on taxes. Additionally, you will be required to pay a special penalty tax. Deductions for expenses that you incur as a result of the PSB will also not be allowed.
All this could significantly increase your tax bill. You may pay a tax rate of up to 39.5% higher than what you were initially without incorporating a PSB.

Understand what the CRA is looking for when determining whether a business is a PSB. You can work with an accountant to help you avoid the strict PSB rules.

For more information call us at +1 (416) 900 3826 / +1 (800) 993 0633 or visit our website at

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