PSB Contractor Tax

INDICES OF A PERSONAL SERVICE BUSINESS

Some of the indices for having one's business enterprise construed as a personal service company / personal service business (PSB) include the following:

- the individual performing the services (or someone related to the person) owns 10% or more of any class of shares of the corporation

- without the use of the corporate entity, the individual would reasonably be regarded as an employee of the person or partnership paying a fee to the corporate enterprise

- the corporate enterprise has few clients, or worse, one client

- if the corporate enterprise has only one or two clients, it carries on its duties at that client’s offices on a regular and continuous basis

- the corporate enterprise's client provides an office and tools of the trade (i.e. computer)

- the corporate enterprise has a business card in the name of its client

- the client pay the corporate enterprise on a regular basis, without the submission of an invoice

- the principals of the corporate enterprise have their personal names on the client phone directory

- the principal of the corporate enterprise would appear to others as an officer or an employee of the client

- the corporate enterprise is remunerated on an hourly fees basis irrespective of the time needed to accomplish the task

- the corporate enterprise was hired to perform ongoing services as opposed to completing specific projects

- there are expected hours of work that are to be put in each day

- all services be performed by the principal of the corporate enterprise (i.e. the client does not allow substitution or subcontracting of duties

- supplies and/or equipment needed to complete a task, are provided by the client

- the client absorbs any risk should a project go over-budget

As such, in light of these drastic changes, it is important to understand the legal and tax implications to your business operations, such that appropriate legal advice and structuring is undertaken to deal with your specific situation. Therefore, if you are a contractor or consultant in Alberta, and are looking for advice and/or structural planning for your business operations in light of the Technical Tax Amendments Act, 2012 and its impact should one's business be construed as a Personal Service Business, contact lawyer Christopher Neufeld at Chris@NeufeldLegal.com or 403-400-4092.