Incorporated Businesses and Contractors in BC: How to Handle Expenses and Taxes

If you’re an incorporated business or contractor in British Columbia, understanding how to manage expenses and taxes is essential for running a smooth operation. Whether you work from a home office, meet clients in person, or a mix of both, this blog post covers everything you need to know to stay compliant and optimize deductions.

Writing Off Expenses in Your Corporation

To be deductible, an expense must meet three criteria:

1. Reasonable

2. Incurred to earn business income

3. Properly documented (invoice or receipt)

Personal expenses are not deductible.

Common Deductible Expenses in BC

• Office supplies: paper, pens, software subscriptions, postage

• Utilities: phone, internet, hydro, water (business portion only)

• Rent or mortgage: interest, property taxes (home office portion)

• Wages and salaries: (employees, contractors, yourself)

• CPP/EI contributions: (if on payroll or self-employed EI program)

• Professional services: legal, accounting, consulting

• Marketing and advertising: digital ads, print, swag, business cards

• Insurance: general liability, business, equipment, home office portion

• Travel: flights, hotels, taxis, car rentals, mileage for personal vehicles

• Meals and entertainment: (50% deductible unless for staff events)

• Bank fees and interest

• Training and education: directly related to your business

• Capital assets: computers, cameras, furniture (claimed over time using Capital Cost Allowance)

Vehicle and Travel Expenses

• Deductible if used for client meetings, sales calls, or business events

• If personally owned, track business vs personal kilometers

• Parking is fully deductible; traffic fines are not deductible

Home Office Expenses

Deduct a portion of home costs if:

• It’s your principal place of business, or

• It’s used exclusively for business and client meetings

Deductible home expenses include:

• Rent or mortgage interest

• Utilities (heat, electricity, water, internet, phone)

• Property taxes

• Home insurance

• Maintenance and repairs

BC-Specific Considerations

• Corporate Tax: Small business corporate rate: 2% on first $500K income, plus federal 9% = 11% total

• GST: Businesses earning over $30K/year must register and charge GST; Input Tax Credits can be claimed

• PST: 7%; some professional services are exempt — verify for your services

Working With or as an Incorporated Contractor

For Hiring Businesses:

• Payments to contractors are deductible

• No payroll remittance (CPP, EI, or income tax)

• Keep invoices with GST number if applicable

For Contractors:

• Report payments as revenue

• Deduct expenses including:

  • Operating costs (software, office supplies, phone, internet)

  • Travel/vehicle expenses

  • Marketing and promotion

  • Professional services

  • Home office portion

  • Capital assets

  • Salaries or dividends

Important: Only the party who pays a specific expense can deduct it — avoid double-dipping.

Avoiding Personal Services Business (PSB) Issues

CRA may reclassify a contractor as an employee if:

• They work exclusively for one client

• Client controls work schedule/methods

• Contractor uses client’s tools

• Contractor bears no business risk

Tips to Avoid PSB Classification:

• Clear written contract defining supplier–client relationship

• Contractor controls how work is done

• Maintain multiple clients

• Invoice like any other vendor

Key Takeaways

• Hiring businesses can deduct contractor invoices as expenses

• Contractors report income and deduct business costs

• Both sides benefit when done correctly, avoiding overlapping claims