Consultants reach international clients more easily than almost any other small business, and the tax treatment differs from domestic work in ways worth understanding before the first invoice.

GST/HST. Services supplied to a non-resident who is not registered in Canada are, in many cases, zero-rated: you charge nothing but continue to claim input tax credits on your costs. The rules are more specific than that summary suggests, with exceptions turning on where the service is performed, whether it relates to Canadian real property or goods, and whether the non-resident is in Canada when the service is supplied. Advisory work delivered remotely to a foreign company usually qualifies; a service connected to something physically in Canada often does not.

Two practical consequences follow. Foreign revenue still counts toward the $30,000 GST/HST registration threshold, because zero-rated supplies are taxable supplies at 0%. And a consultant with mostly foreign clients is typically in a refund position, which makes registration worthwhile even below the threshold and argues for filing more frequently than annually.

Withholding tax. Some countries require a payer to withhold tax on payments to foreign service providers. Where that happens, you receive less than you invoiced and may be able to claim a foreign tax credit against Canadian tax on the same income. Keep the withholding documentation; without it the credit is difficult to support. The relevant tax treaty often reduces or eliminates the withholding, but usually only if you provide the payer with the right residency certification before payment (for US clients, usually Form W-8BEN-E).

Currency. Invoice in a foreign currency and you carry exchange risk between invoice and payment. Record the receivable at the Bank of Canada rate on the invoice date and the difference on settlement as a foreign exchange gain or loss. Over a year of US-dollar invoicing this is a real number, and it belongs in your books rather than being absorbed into revenue.

Contracts worth having

A written engagement letter is worth more to a consultant than to almost any other small business, because the deliverable is intangible and disputes are therefore about memory. Define the scope, what is explicitly out of scope, the fee basis, what triggers additional fees, payment terms and interest on late payment, ownership of intellectual property, and how either party ends the engagement.

The scope and change-fee clauses do most of the work. Scope creep is the largest single cause of poor realisation in professional services, and it is far easier to raise a change fee against a written scope than to argue about what was originally agreed.