Subcontractors & Hired Labour — Canada Tax Rules

Claim payments to subcontractors and freelancers who assist with your business — and understand your T4A reporting obligations.

Claimable: Fully claimable · Tax authority: CRA (Canada Revenue Agency)

CRA (Canada Revenue Agency) Rules

• Payments to subcontractors (other self-employed individuals) for work on your business projects are fully deductible business expenses.
• If you pay a subcontractor C$500 or more in a calendar year (and they are not incorporated), you must issue them a T4A slip by the last day of February of the following year.
• Incorporated subcontractors receive an invoice — no T4A is required for incorporated entities.
• Keep all invoices from subcontractors — date, services rendered, amount, and the subcontractor's details.
• Worker classification matters: if CRA determines a worker is an employee rather than a contractor, you may owe payroll source deductions and penalties.
• GST/HST-registered subcontractors will charge you GST/HST on their invoices — you can claim these as Input Tax Credits (ITCs) if you are also GST/HST registered.

Limits

No dollar cap on subcontractor deductions. T4A filing is required for unincorporated subcontractors paid C$500+ per year. Failure to file T4As can result in CRA penalties.

Worked Example

Nina is a web designer. She pays a freelance developer C$3,500 for coding, a photographer C$800 for product photos, and a copywriter C$600 for website content. All three are unincorporated. Total deductible subcontractor costs: C$4,900. She must issue T4A slips to all three by 28 February of the following year.

Record Keeping

• Keep all subcontractor invoices showing: name, address, services, date, and amount
• Obtain the subcontractor's Social Insurance Number (SIN) or Business Number (BN) for T4A filing
• Issue T4A slips by the last day of February (Box 048: Fees for services) for all unincorporated contractors paid C$500+
• Keep written contracts or statements of work to support worker classification as independent contractors
• Retain GST/HST invoices from registered subcontractors to claim ITCs

Frequently Asked Questions

When do I need to issue a T4A slip to a subcontractor in Canada?

You must issue a T4A slip to any individual or unincorporated entity you pay C$500 or more in a calendar year for services rendered. Report the payment in Box 048 (Fees for services). T4A slips are due to the recipient and CRA by the last day of February following the payment year.

Do I need to issue a T4A to an incorporated subcontractor?

No — if the subcontractor operates through a corporation, you receive an invoice from their company and pay the corporation. No T4A is required. You still deduct the payment as a business expense and keep the invoice.

What are the penalties for not filing T4A slips in Canada?

CRA can assess a penalty of C$25 per day (minimum C$100, maximum C$2,500) for each T4A slip filed late or not at all. For repeated failures or more than 50 missing slips, higher penalties apply. File T4As on time to avoid these penalties.