How do I pay a US contractor from a Canadian business?

The default case: a US contractor working entirely from the US

When a US-based contractor never sets foot in Canada and delivers all their work remotely, the payment is treated as an ordinary business expense rather than something that triggers Canadian payroll or contractor reporting rules. There is no CPP, EI, or income tax to withhold, and no T4A slip to issue, because the T4A regime is aimed at fees paid to contractors for services, and the CRA’s administrative practice does not require a Canadian payer to report fees paid to a non-resident performing services entirely outside Canada.

You still want a clean paper trail: a signed agreement or statement of work, dated invoices describing the services, and some basic identifying information for the contractor. This protects you if the CRA ever questions the nature of the payment, and it is simply good bookkeeping practice regardless of where the contractor is based.

GST/HST generally does not apply either, since the non-resident contractor is not making a taxable supply in Canada the way a Canadian-resident supplier would be. A business that is fully engaged in taxable commercial activity does not need to do anything further here. The exception is a business that is not fully taxable, such as one making exempt supplies, which may be required to self-assess GST/HST on the fee under the imported taxable supply rules; this narrower situation is worth flagging to your accountant if a meaningful part of your revenue is GST/HST-exempt.

Payment methods and the currency question

Most Canadian businesses pay US contractors by wire transfer, ACH through a US bank account, or a payment platform such as PayPal or Wise, with Wise and similar services often working out cheaper than a traditional bank wire once fees and exchange spread are factored in. Whichever method you choose, decide up front whether the invoice is priced in US or Canadian dollars, and who absorbs the currency conversion cost, since that detail is easy to overlook until the first invoice lands.

For your own books, record the expense in Canadian dollars using the exchange rate on the date of payment, and keep the contractor’s invoice attached to the transaction so a future review can trace the conversion. Businesses paying several US-based contractors regularly, such as software firms working with US developers, benefit from setting this process once rather than re-deciding it invoice by invoice; our cross-border tax support for IT firms covers this alongside broader US-Canada tax questions.

Do you need a W-9 or a W-8?

A W-9 is a US Internal Revenue Service form a US payer uses to collect a contractor’s taxpayer identification number for a 1099 filing. Since a Canadian business generally has no US 1099 obligation for a contractor performing work outside the US, you are not required to collect a W-9. Some contractors will send one anyway out of habit, and there is no harm in keeping it on file, but do not treat its absence as a compliance gap on your side.

What matters more from a Canadian standpoint is your own vendor file: a signed agreement, invoices, and confirmation the contractor is genuinely operating as an independent business rather than functioning as a de facto employee. Our answer on T4A slips and which contractors get one explains why this contractor is treated differently from a Canadian-resident contractor you pay for the same kind of work.

What changes if the contractor comes to Canada

The analysis shifts if the US contractor travels to Canada and performs any part of the work here in person, even briefly. Payments to a non-resident for services rendered in Canada are generally subject to Regulation 105 withholding at 15% of the gross fee, reported on a T4A-NR rather than a regular T4A. The withholding applies regardless of whether the contractor ultimately owes Canadian tax once their full situation, including any treaty relief, is worked out.

A contractor who expects to be exempt from Canadian tax under the Canada-US tax treaty can apply to the CRA in advance for a waiver of the Regulation 105 withholding, which avoids the wait for a refund after filing a Canadian non-resident return. This waiver has to be requested before the work is performed and payment is made; it is not something that can be retrofitted after the fact once withholding has already happened.

How we help clients running cross-border contractor payments

Even once the withholding and GST/HST questions are settled, it is worth revisiting whether the relationship still looks like a genuine contractor arrangement rather than a de facto employment relationship carried out across a border. A contractor who works set hours, takes direction the way an employee would, and has no other clients raises the same misclassification questions the CRA applies to domestic arrangements, even though the person happens to be a US resident; our answer on how the CRA decides employee versus contractor status covers the factors that matter. On the bookkeeping side, these payments should be coded consistently as a contractor or professional fees expense, separate from payroll wages, so your financial statements reflect the actual mix of employees and contractors on the team.

We set up a standard process for clients who regularly pay contractors on both sides of the border: which forms to collect, when Regulation 105 applies, and how the payments should be booked and reported. Marketing agencies and IT firms working with US freelancers are a common example, since the mix of Canadian employees and US contractors on the same team raises exactly these questions; see our cross-border tax page for agencies for that specific setup. Our cross-border tax services cover the broader picture beyond just contractor payments.