Personal Services Business Incorporated Employee
                     Personal Services Business Incorporated Employee
https://www.maroofhs.com/tax-services-canada/corporate-tax-se
rvices-canada/
This is very common for the employers to avoid expenses by asking 
their employees to sign contracts as corporations in Canada. If you 
are an IT professional in Canada and your employer has asked you to 
incorporate a business and sign the contract, you must know the tax 
implications of these decisions.
When a corporation has an incorporated-employee who performs 
services on its behalf, it is called Personal Services Business (PSB) as 
per Income Tax Act in Canada.
First, see if your relationship is of employee or independent contactor 
with the business for whom you are providing these services. IF the 
relationship is of employment nature, your corporation will be a PSB. 
If the relationship is of independent contractor, you have an active 
business income.
Now, determining whether the relationship is employee or contractor, 
is a fact based exercise. Simply signing a contract and saying it is a 
contractor is not enough.
A brilliant article written by Maroof H. Sabri
 provides a basic understanding about tax implications of incorporat
ed employees
.
Earning a PSB income in Canada is subject to 33% federal 
corporate income rate plus provincial rates. In Ontario, if you have 
carried on a PSB, the tax rate will be 44.5%. Further, there are very 
limited deductions available as opposed to CCPC or other private 
corporations in Canada. This means such contractors end up paying 
lot more in Taxes and very little take home income.
There are two exceptions. You should have “more” than five full 
time employees or if the income is generated through an associated 
corporation.
It is always recommended to seek the advice a professional 
corporate income tax accountant in Canada in such cases. The 
instant decisions made today may have huge tax implications in the 
future.
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