Personal Services Business Risks for Truckers and Trades
The Personal Services Business (PSB) rules are catching thousands of incorporated contractors by surprise. If CRA determines your corporation is a PSB, your tax rate nearly doubles.
- PSB status means losing small business tax rates
- Truckers and trades are high-risk for PSB classification
- CRA looks at control, tools, and financial risk
- Structure your business to avoid PSB designation
What Makes You a PSB?
A Personal Services Business exists when you would reasonably be considered an employee of your client if not for your corporate structure.
CRA Assessment Factors
Does the client control when, where, and how you work? High control = employee relationship.
Do you own your own tools and equipment? Owning your equipment = contractor.
Do you have potential for profit or loss? Financial risk = contractor.
Tax Consequences of PSB
- No small business deduction (taxed at ~33% instead of ~12%)
- Limited expense deductions
- Cannot integrate dividends efficiently
Have multiple clients, own your equipment, hire helpers, set your own schedule, assume financial risk on contracts.
Worried About PSB Status?
Tax Punjabi can review your situation and help you structure for compliance.