Contractors’ Questions: Do I add VAT if invoicing a Canadian client?

Contractor’s Question: I’m stuck on charging VAT for services in Canada. Do I add VAT to my invoice to a Canadian company for IT consultancy services provided by me (UK resident/VAT registered ‘Ltd’ company) while physically in Quebec? If not, as I suspect, do I not pay any VAT to HMRC? Is there anything else I need to aware of in this situation?

Expert’s Answer: Although you’ve put forward a few queries here, the crux of your question relates to VAT.

In line with what you expect, there is no requirement for you to add VAT to your company’s invoice as your situation is outside the scope of VAT.

As I have no knowledge of your personal circumstances, your visa stipulations, your contract schedule and period of time spent in Canada, it is impossible for me to determine what other things you need to be aware of. However, initial points you may need to consider include:

• Before issuing the invoice, you should check there is no Canadian tax being withheld by the client.
• If you remained ‘non-resident’ throughout your time in Canada, you may still have to settle local personal taxes on Canadian-sourced income.
• Otherwise, a local liability could still be triggered if you are deemed to have “habitually exercised (in Canada) an authority to conclude contracts in the name of the enterprise (your UK company)”.
• As there is no reciprocal healthcare agreement between Canada and the UK, you should check there are no outstanding social security coverage issues.

All the above should be responded to (on your behalf) by a locally-qualified tax professional. Professional accounting bodies here in the UK such as the ICAEW or ACCA could refer you to UK-members duly qualified to give definitive Canadian tax advice. Best of luck!

The expert was Mike Phillips of its international, an advisory to UK contractors working overseas.

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