How to Pay Contractors in Canada: Complete 2025 Guide

Why This Guide Is Different

Paying Canadian contractors is simpler than paying US contractors in some ways (no complex state rules), but has unique requirements (T4A forms, GST/HST, provincial considerations). This guide covers everything you need to know whether you're a Canadian business paying Canadian contractors, or an international business paying contractors in Canada.

Most guides focus on US tax rules or international EOR platforms. This guide is specifically for businesses working with Canadian independent contractors and self-employed professionals.

Payment Methods Compared

Recommended: Interac for Canada, Wise for International

If you're a Canadian business paying Canadian contractors: Use Interac e-Transfer through your Canadian bank. It's free, instant, and contractors receive CAD directly in their Canadian bank account. Most Canadian banks include unlimited Interac e-Transfers.

If you're an international business paying Canadian contractors: Use Wise. You'll get mid-market exchange rates (3-4% better than PayPal or banks) and low fixed fees ($3-7 CAD per transfer). Contractors receive CAD in 1-2 days.

How to set up Wise payments to Canadian contractors:

1. Create a Wise business account (free)
2. Get contractor's Canadian bank details (institution number, transit number, account number)
3. Send CAD to their Canadian bank account
4. Wise converts at mid-market rate if you're paying from USD, EUR, etc.
5. Contractor receives CAD in 1-2 business days

Tax and Compliance Requirements

T4A Form (Annual Filing)

If you're a Canadian business and paid a contractor $500+ CAD in the calendar year, you must file a T4A slip. This is similar to the US 1099-NEC but with different thresholds and deadlines.

T4A requirements:

• Threshold: $500+ CAD paid in the calendar year
• Deadline: Last day of February (file with CRA and provide copy to contractor)
• What to report: Total fees paid for services (Box 048)
• Who needs it: Canadian businesses paying Canadian contractors

Pro tip: If you're an international business paying Canadian contractors, you typically don't need to file T4A. The contractor reports the income on their Canadian tax return.

GST/HST Considerations

Canadian contractors must register for GST/HST if their revenue exceeds $30,000 CAD annually. Once registered, they charge GST/HST on their invoices.

GST/HST rates by province:

• HST (Harmonized Sales Tax): 15% in Atlantic provinces, 13% in Ontario
• GST only: 5% in Alberta, BC, Saskatchewan, Manitoba, Quebec (plus provincial sales tax)
• No provincial sales tax: Alberta (5% GST only)

What this means for you:

• If contractor is GST/HST registered, they'll charge it on invoices
• You pay the GST/HST amount to them
• They remit it to CRA
• If you're GST/HST registered, you can claim input tax credits (ITC)
• If you're not registered, it's an additional cost

What You Need from Canadian Contractors

Unlike US contractors, Canadian contractors don't need to provide W-9 forms. However, you should collect:

• Invoices: Contractors should provide invoices for all work completed
• GST/HST registration: If contractor is GST/HST-registered, they'll include their registration number on invoices
• Business number: If they're incorporated, get their business number
• Bank details: Institution number, transit number, and account number for EFT payments
• SIN (for T4A): Social Insurance Number if you're filing T4A

What You Need to Keep

CRA requires you to keep records for 6 years. You should maintain:

• All contractor invoices
• Proof of payment (bank statements, Wise receipts, Interac confirmations)
• Contracts or statements of work
• T4A slips and filing confirmations
• GST/HST documentation (if claiming ITCs)

Pro tip: Kontrable automatically stores all invoices, contracts, and payment records in one place, making CRA audits stress-free.

Common Mistakes (And How to Avoid Them)

Mistake 1: Missing the T4A Deadline

Problem: You paid a contractor $600 CAD in January, then forgot about them. Come February, you realize you need to file T4A but don't have their SIN. CRA penalties apply.

Solution: Collect SIN during onboarding. Track cumulative payments per contractor. Kontrable automatically tracks when you hit the $500 threshold and reminds you to file T4A.

Mistake 2: Not Claiming GST/HST Input Tax Credits

Problem: You're GST/HST registered but don't claim input tax credits on contractor invoices. You're leaving money on the table.

Solution: Ensure contractors provide proper invoices with GST/HST breakdown. Keep all invoices organized. Claim ITCs on your GST/HST return.

Mistake 3: Using PayPal for Currency Conversion

Problem: You're a US business paying Canadian contractors via PayPal. PayPal's exchange rate is 3-4% worse than mid-market. For a $5,000 USD payment, you lose $150-200 USD to bad exchange rates.

Solution: Use Wise for international payments. You get mid-market rates and save 3-4% on every payment. For $50,000 USD/year in contractor payments, that's $1,500-2,000 USD saved.

Mistake 4: Treating Contractors Like Employees

Problem: You set the contractor's hours, provide equipment, and require them to work exclusively for you. CRA audits and determines they're actually an employee. You owe back CPP, EI, and penalties.

Solution: Understand CRA's contractor vs employee tests. Contractors should control how they work, use their own tools, and be able to work for other clients. Document the relationship properly.

Tools for Canadian Contractor Management

For payments:

• Interac e-Transfer via your Canadian bank (free for Canada-to-Canada)
• Wise (best for international to Canada, $3-7 CAD per transfer)
• PayPal (convenient but higher fees)

For compliance and management:

• QuickBooks or Xero (accounting software, $15-40 CAD/month, not contractor-specific)
• Spreadsheets (free but error-prone and time-consuming)
• Deel or Remote.com ($49-99 CAD per contractor per month, built for EOR not contractors)

For contractor operations:

Kontrable is built specifically for managing independent contractors, including Canadian contractors:

• Invoice management and approval workflows
• Payment tracking (works with Interac, Wise, PayPal, any payment method)
• Contract storage and e-signatures
• T4A preparation and tracking
• 6-year record retention (CRA compliant)
• Project and milestone tracking

Pricing: $99 USD/month ($135 CAD/month) for up to 25 contractors. No per-contractor fees. Early access users get 50% off for 6 months.

Frequently Asked Questions

Get Started

Managing Canadian contractors?

1. Collect SIN and business information during onboarding
2. Set up Interac e-Transfer (Canada) or Wise (international)
3. Require invoices with GST/HST breakdown if applicable
4. Track cumulative payments for T4A filing
5. Keep records for 6 years

Want to automate this?

Kontrable launches Q1 2026 with contractor management tools built for Canadian compliance. Invoice workflows, payment tracking, T4A preparation, 6-year record retention, and contract storage. $99 USD/month for up to 25 contractors.