Can I be self-employed with the Working Holiday?

  • The Working Holiday is an open work permit, so you are allowed to work for any employer in any relationship no matter as employee or self-employed (except, of course, in the jobs excluded on the work permit).
  • With the Young Professional, you are tied to a specific employer in Canada and you are not allowed to have a part-time job, even if it is a freelancer job.

So yes, if you have an open work permit like the Working Holiday you can work as a freelancer or contractor. You are then classified as an “independent contractor”.

There is one exception if you are on a closed work permit tied to an employer (for example Young Professional or LMIA work permit). You can do remote work for employers outside of Canada and with no Canadian connections, for example you cannot search for, meet, or serve Canadian customers.

The benefits of being a freelancer:

  • You can be your own boss.
  • The pay is better.
  • You can choose which projects you want to work on.
  • No fixed working hours, you can choose your own time. You have the flexibility to adjust the schedule so that you can make the most of your travelling life in Canada.
  • As a self-employed person, you can deduct more expenses on your tax return. Deductions are not possible for ordinary employees. e.g. travel expenses, business licences, internet connection, mobile phone costs, etc.
  • You can work anywhere.

The disadvantages of being self-employed compared to a normal employee:

  • You don’t get paid overtime.
  • You don’t get vacation pay, i.e. 4% of gross income
  • You don’t get holiday pay, which means additional pay per statutory holiday, of which there are 9 in Canada.
  • Mandatory CPP Contributions: Because you are your own employer you have to pay your part and the the employer’s part of the CPP (Canada Pension Plan) premiums. For 2021 that is 10.9% in addition to your taxes. 
  • You are not insured at the workplace. You have to get a business health/accident insurance, which can be very expensive.
  • You have to get a liability insurance. In an office working at home it is not a big deal not to have one, but for example if you are working as a contractor in construction or working on-site at your client’s home where mistakes can lead to a huge lawsuit liability insurance is imperative. The employer will always be off the hook as they  hired you as a contractor….
  • As a self-employed sole proprietor you are responsible for your mistakes and in case of a lawsuit the court can go after all your personal belongings including your personal bank accounts and assets like home or car.
  • No entitlement to unemployment benefits after you get laid off or contract ends.
  • You are responsible for the payment of your own income tax to the CRA. The employers will not deduct any taxes.

A few important things to keep in mind:

  • The most important information: If you intend to immigrate to Canada via the “Canadian Experience Class” of the Express Entry program, then the self-employed time will not count towards your Canadian experience.
  • An employer can’t just get to decide: “I’ll hire you as an independent contractor so I don’t have to pay CPP, EI, vacation pay, overtime pay, holiday pay or other benefits, report your income, etc.”. That is called tax evasion. The CRA is very strict about the difference. They can decide if you are an employee or self-employed and overrule the employer.
    • Can you answer those questions with yes? Then you will be a regular employee.
      – Will the employer set the schedule for you?
      – Will the employer set the wage?
      – Will you work in the employer’s office or location and with all the tools and equipment provided by the employer?
  • In Canada, you don’t have to register a business name as sole proprietor if you use your personal name as your company name in the invoices. But if you write the invoice with a different name, it must be registered.
  • In some provinces you have to apply for a business license. To do this, you would have to inform yourself specifically about the requirements of the respective province.
  • If you make more than $30,000 self-employed income over four consecutive calendar quarters, you have to register for a GST/HST account, charge those taxes on your invoices and remit them to the Canada Revenue Agency (CRA) by filing a GST return in addition to the regular tax return. More info on the CRA homepage >> here <<.
  • As a sole proprietor it is your job to keep track of all income and expenses. The self-employment income is filed together with your personal tax return. You have to fill out a special form to report the self-employment income and expenses. Taxes are then calculated for the total income for the tax year. For the tax season just put aside about 30% of your income. Then it won’t hurt that much at tax time when you file your Canadian tax return.
  • A lot more information about the difference “Employee or Self-employed?” can be found >> here << on the CRA homepage.
  • You should get the taxes done by an accountant if you have many expenses. They will help maximize the tax deductions. 
  • Put about 30% of your earnings aside for the tax season. Then the tax bill doesn’t come with a big shock.