If you’re a Canadian freelancer earning money from US clients, you’ve probably wondered: do I owe taxes in the US? Will 30% get withheld? Do I need to file with the IRS?
The reassuring answer: you almost certainly don’t owe US taxes. But you do need to handle the paperwork correctly, or money will get withheld that shouldn’t be.
Do you need to pay US taxes on freelance income?
Short answer: no, as long as you meet two conditions:
- You’re a Canadian resident (not a US citizen or green card holder)
- You don’t have a “permanent establishment” in the US (like an office or fixed place of business there)
The Canada-US Tax Treaty protects you from being taxed in both countries. Under Article VII (Business Profits), the US cannot tax your business income if you don’t have a permanent establishment on US soil. Your freelance work performed from Canada, even for American clients, is only taxable in Canada.
The catch: US companies and platforms are required to withhold 30% of payments to foreign contractors unless you prove you’re eligible for a treaty exemption. That proof is the W-8BEN form.
W-8BEN explained
The W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting) tells a US payer two things:
- You’re not a US person
- You’re entitled to a reduced withholding rate under a tax treaty
Without it, the US company paying you must withhold 30% of your gross payment and send it to the IRS. With a properly completed W-8BEN, the withholding rate on your service income drops to 0%.
Who needs to fill one out? Any Canadian freelancer, sole proprietor, or independent contractor receiving payments from a US company or platform. If a US client asks you for a W-9, that’s the wrong form. The W-9 is for US persons. You need the W-8BEN.
You can download the form from the IRS website. It’s valid for three calendar years from the date you sign it, then you’ll need to submit a new one.
How to fill out the W-8BEN
The form looks long, but most of it doesn’t apply to you. These are the fields that matter:
| Line | Field | What to enter |
|---|---|---|
| 1 | Name | Your legal name (as it appears on your Canadian tax return) |
| 2 | Country of citizenship | Canada |
| 3 | Permanent residence address | Your Canadian home address |
| 5 | U.S. taxpayer identification number | Leave blank (you likely don’t have one and don’t need one) |
| 6a | Foreign tax identifying number | Your Canadian SIN or business number |
| 6b | FTIN not legally required | Check this box |
| 9a | Treaty country | Canada |
| 9b | Article and paragraph | Article VII, paragraph 1 |
| 9c | Rate of withholding | 0% |
| 9d | Type of income | Independent personal services / Business profits |
| 9e | Conditions | ”Resident of Canada with no permanent establishment in the United States” |
| Certification | Sign and date | Sign it, date it, done |
Part II (lines 9a–9e) is the part that matters most. This is where you claim the treaty benefit that reduces your withholding from 30% to 0%. Skip this section and the form is basically useless.
Leave everything else blank. Lines 4, 7, and 8 are for situations that don’t apply to most Canadian freelancers.
The Canada-US tax treaty: how it protects you
The Canada-United States Tax Convention prevents double taxation between the two countries. For freelancers, the key provision is Article VII, Business Profits:
The business profits of a resident of Canada are taxable only in Canada, unless the resident carries on business in the United States through a permanent establishment situated there.
“Permanent establishment” means a fixed place of business in the US: an office, a branch, a warehouse. Working remotely from your apartment in Toronto for a San Francisco startup doesn’t count. Neither does occasionally travelling to the US for meetings.
As long as you’re performing services from Canada and don’t have a physical business presence in the US, your income is taxable only in Canada.
Reporting USD income on your Canadian tax return
All your US-sourced income must be reported on your Canadian tax return, converted to Canadian dollars. The CRA has specific rules about which exchange rate to use.
For business income: Use the Bank of Canada annual average exchange rate for the tax year, or the daily rate on the date of each transaction. Either method is acceptable, but you must be consistent within a tax year.
For most freelancers, the annual average rate is simpler. If the average USD/CAD rate for the year was 1.3497, a $5,000 USD invoice becomes $6,748.50 CAD on your return.
Report this income on Form T2125 (Statement of Business or Professional Activities), the same form you use for all your self-employment income. The CRA doesn’t care that the client was American. It’s just business income.
Keep records of the original USD amounts and the exchange rates you used. If the CRA ever asks, you’ll need to show your conversion method.
Platform-specific: how Upwork, Fiverr, and US companies handle withholding
Each platform and company handles the W-8BEN differently:
Upwork asks you to fill out a W-8BEN electronically during onboarding. Once submitted, no US tax is withheld from your earnings. If you skip it, Upwork withholds 30% and you’ll have to claim it back from the IRS, which is a painful process.
Fiverr requires tax form submission through their Tax Information page. Same deal: complete the W-8BEN and withholding drops to 0%.
Direct US clients (companies paying you by invoice) will typically send you a W-8BEN to complete before your first payment. Some smaller companies don’t bother, which means no withholding happens anyway. But if they ask, fill it out promptly. Accounting departments won’t process your invoice without it.
Stripe, PayPal, and Wise don’t withhold taxes. They’re payment processors, not payers. Your withholding obligation (or lack of one) is between you and the company paying you.
Key rule: Complete the W-8BEN before you receive your first payment. Retroactively claiming back withheld tax is possible but slow and frustrating.
What if US tax was withheld?
If 30% was withheld from a US payment (maybe you forgot to submit a W-8BEN, or a platform withheld it anyway), you’re not out of luck.
Step 1: Claim it on your Canadian return. File Form T2209 (Federal Foreign Tax Credits) with your tax return. This gives you a credit for the foreign tax paid, reducing your Canadian tax bill by the same amount.
Step 2: Request a refund from the IRS (optional). You can file a Form 1040-NR with the IRS to claim back the withheld amount directly. This takes time (often 6–12 months) but gets you the actual money back rather than just a credit.
Which approach is better? If the withheld amount is small and your Canadian tax bill is high enough to absorb the credit, T2209 is simpler. If the withholding was substantial, filing with the IRS to get the cash back is worth the effort.
Either way, keep the documentation: any 1042-S forms you receive from US payers (their equivalent of a T4A for foreign persons), records of the amounts withheld, and proof of the exchange rates used.
GST/HST on services exported to US clients
Good news here: services performed for non-resident clients are generally zero-rated for GST/HST purposes. That means you charge 0% GST/HST on invoices to US clients.
Under the Excise Tax Act, a supply of a service is zero-rated when the recipient is a non-resident who is not registered for Canadian GST/HST purposes. Your American clients almost certainly aren’t registered for Canadian GST/HST.
This is different from being exempt. Zero-rated means:
- You don’t charge GST/HST to your US clients
- You can still claim Input Tax Credits on your Canadian business expenses
- You still need to be registered for GST/HST if your total worldwide revenue exceeds $30,000
So if you’re buying a laptop, paying for software, or deducting home office expenses, you recover the GST/HST on those costs even though you’re not charging it to your US clients. That’s a real financial benefit.
Track multi-currency income without the spreadsheet
When you’re earning in USD and spending in CAD, keeping clean records gets complicated fast. Exchange rates shift, and you need to track the CAD equivalent of every payment for your tax return.
Accountly handles multi-currency income automatically. Connect your accounts, and it converts USD earnings at the correct Bank of Canada rates, categorizes your expenses, and keeps everything ready for T2125 reporting. No manual currency conversion spreadsheets required.
Frequently asked questions
Do I need a US Social Security Number or ITIN to fill out the W-8BEN? No. Line 5 (US TIN) can be left blank. Enter your Canadian SIN or business number on Line 6a as your foreign tax identifying number. The IRS does not require Canadian freelancers to obtain a US tax ID just to claim treaty benefits.
How long is a W-8BEN valid? Three calendar years from the date you sign it. If you signed in March 2026, it expires December 31, 2029. Your client or platform will ask for a new one before it expires.
What if my US client refuses to pay without a W-9? Explain that the W-9 is for US persons only. As a Canadian non-resident, the correct form is the W-8BEN. Point them to the IRS instructions for the W-8BEN. Most accounting departments know this already, but smaller companies sometimes don’t.
Do I need to file a US tax return? Generally no, as long as your W-8BEN is on file and no US tax was withheld. If tax was withheld and you want to claim it back directly from the IRS, you’d file a 1040-NR. But for most Canadian freelancers with a valid W-8BEN, no US filing is required.
Can I use Form W-8BEN-E instead? The W-8BEN is for individuals. If you’re incorporated (operating through a Canadian corporation), you’d use the W-8BEN-E instead. Sole proprietors and unincorporated freelancers use the regular W-8BEN.
What exchange rate should I use for reporting USD income to the CRA? Either the Bank of Canada daily rate on the date of each transaction, or the annual average rate for the tax year. Pick one method and stick with it for the entire year.
For a broader overview of how freelance taxes work in Canada, including deductions, CPP, and quarterly instalments, check out our freelance taxes 101 guide.
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