Can I be self-employed with an IEC work permit?

  • 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 work for another employer or have a part-time job, even if it is a freelancer job.

The benefits of being a freelancer:

  • You can be your own boss.
  • The pay is better as you can set your own pay.
  • 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.
  • You can work anywhere you want.
  • As a self-employed person, you can deduct more expenses on your tax return. e.g. travel expenses, business licences, internet connection, mobile phone costs, etc. (Deductions are not possible for regular employees.)

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 2024 that is 5.95% + 5.95% in CPP premiums to a maximum of $7,735.  >> All years here << 
  • You are not insured at the workplace through the WCB of the employer in case of a work accident. You have to get your own health/accident insurance, which can be very expensive.
  • You have to get a liability insurance. Working in an office or at home is not a big deal not to have liability insurance, 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, then 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.
  • You are not eligible for employment insurance (EI) benefits after you get laid off or your contract ends.
  • You are responsible for the payment of your own income tax to the CRA. The employers will not deduct any taxes.
  • 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. 
      • The link to the expenses that can be claimed >> here << 
  • A lot more information about the difference “Employee or Self-employed?” can be found >> here << 
  • Put about 30% of your earnings aside for the tax season. Then the tax bill doesn’t come with a big shock.