Strategic IT ‘X’ FILES
TAXATION OF IT INDEPENDENT CONSULTANT
1. Background
Government authorities
The tax status of independent IT consultants incorporated as small businesses is challenged by government authorities. They attempt to assimilate them to personal service companies (ESP). The financial consequences are important.
Threatened tax status:
A large number of independent IT consultants received retroactive tax contributions from the Quebec Revenue Agency (QRA) and the Canada Revenue Agency (CRA), among others, to recover amounts deducted as small business (ECD) following a reclassification of their services.
Many are assessed and vehemently object to this offensive. There have been close to a hundred known cases covered by this tax approach, since 2006, and some are AQIII members.
Therefore:
These member companies are financially reclassified as ESP (retroactively) (in the tens of thousands of $).
2. AQIII'S ACTIONS
AQIII finds that the tax reinterpretation by government authorities does not match the reality of independent IT consultants. Since 2006, AQIII deployed major efforts to favorably position the status of it’s members.
Support for a typical case in court
AQIII financially supported all the legal costs of a "typical case" from the beginning of 2009 to the summer of 2011, that is to say a tax dispute about a member’s tax status.
The favorable ruling in June 2011 in the TAP Consultant inc case recognizes and demonstrates the correctness of AQIII in the defense of this case. Since, AQIII’s representations have helped to change the interpretation of tax guides by ARQ workers and now better reflect the independent IT consultant’s working reality. AQIII keeps a watch on this highly sensitive issue and has developed a comprehensive plan for representation before federal agencies to educate decision makers to the realities of working with an independent IT consultant.
3. HOW TO PROTECT YOURSELF
AQIII IT ToolBox
AQIII provides its members with a multitude of guides, tools and advice regarding their tax status and relating best practices.
Video Capsule: best tax practices by Patrick-Claude CARON (free)
Contract Models with and without intermediary (free)
Best Tax Practices Guide (members only - please log in)
IT TOOL BOX. (Members: Log in to enjoy exclusive extra tools)
4. AQIII and its mentors to the rescue
Do you have questions about your tax status or tax assessments by Revenue Quebec or the Canada Revenue Agency? Need more information?
Contact AQIII’s TAXATION COMMITTEE via email
DID YOU KNOW?
MORE FOR MEMBERS!
- Login to access exclusive tools, tips & tricks, just for members
- What to do in case of a tax audit?
- Judgment of the Court of Québec "T.A.P. Inc. consultant. c. Revenu Québec "
Two AQIII taxation CASES Explained
On 21 May 2014, AQIII held a conference dinner on taxation; This was a first as a panel discussion for AQIII. A conference on taxation, having as main subject, the testimony of two members, Linda Croisetièere and Simon Laverdière, who went through the process with the governement regarding their tax status. As a bonus, our lawyer and tax expert, Maitre Caron, who won numerous causes related to taxation, validated and advised each step.
During this evening, we learned that in a communication made by the tax authorities, it is important to confirm the request in writing; we know that quick phone requests and replies, without validation, can cause much of a hassle. In case of communication by tax authorities, ask for a detailed email / letter to give you time to validate your answers with your tax advisor (accountant, lawyer, tax ...).
Another interesting fact we learned during the evening is that during a contract renewal, it is important to mention the Annex or projects you'll perform during your mandate. This way, you show that you are working on different projects, in spite of your renewal.
VOX POP
WHAT YOU HAVE LEARNED DURING THIS PRESENTATION?
Bénédicte BALFOURIER AQIII member since 2008
"I have followed with interest the AQIII tax file from the beginning and today's conference made me realize the progress of the case. Following the typical cases of Pragma and TAP, I see certain behaviors that were judged at risk a few years ago and that no longer are considered so risky. »
Christian AUBÉ AQIII member since 2014
"I learned that one is never too careful! The conference will allow me to see if my situation is correct, but I note that tax statuses are treated individually. No one can claim to be perfectly-well structured. There is always a doubt that persists. I paid special attention when he spoke of subordination. »
Martine LEFEBVRE and Christelle NATIVIDAD Code6, AQIII Platinum partners since 2007
"We really loved the formula this year! It was good to have real cases, hear where and how they went... .this is a very unpleasant situation for a freelancer... We liked the explanations of Maitre Caron, which were very explicit and based on examples and case studies. Taxation of our consultants is at the heart of our concerns. We are always on the lookout for news about it. Very interesting and important to know what documents are requested during an audit. We are glad to sponsor such an event! »
Luis Miguel ASTUDILLO AQIII member since 2007
"It was a good conference. They informed me about the tax audit on what to do not to get into trouble. But all that is contextual. It was not the first time I attended a conference on taxation by AQIII and I appreciated that they approached the concept of subordination this time. »
