GST/HST for subcontractors in Canada comes up on both sides of a freelance business. You might be the subcontractor billing a larger agency, or you might hire another freelancer to help deliver a client project. Either way, the same core rule applies: if the subcontractor is registered, they normally charge GST/HST on taxable services. If they are not registered and still a small supplier, they usually do not.
The tricky part is that subcontractor revenue, invoices, and input tax credits all affect your GST/HST records. Here is the practical version for Canadian freelancers, consultants, designers, developers, marketers, trades, and other sole proprietors.
GST/HST for subcontractors in Canada: the basic rule
A subcontractor is still running their own business. If they provide a taxable service in Canada and they are registered for GST/HST, they charge GST/HST to the business that hired them. The fact that the end client belongs to someone else does not make the work tax-free.
Example: you are an Ontario web developer subcontracting for a design agency. You invoice the agency $4,000 for development work. If you are registered for GST/HST, you generally charge 13% HST, so the invoice is $4,520. The agency may then charge its own client separately.
If you are not registered because you are under the $30,000 small supplier threshold, you generally do not charge GST/HST yet. Do not add a GST/HST line unless you actually have a GST/HST registration number.
Does subcontractor income count toward the $30,000 threshold?
Yes, if it is revenue from taxable supplies. Subcontracting income is usually business revenue just like direct client income. It counts toward the CRA small supplier threshold even though you are billing another business instead of the final customer.
This is a common mistake for freelancers who do a mix of direct client work and white-label subcontracting. A $12,000 agency project, $10,000 in direct consulting, and $9,000 in recurring support work can combine to push you over the threshold. The CRA looks at total taxable supplies, not how many clients you have or whether you call the work subcontracting.
The threshold is also rolling, not calendar-year only. Use HST Hero to track subcontractor invoices and direct revenue together so you can see when registration is coming before the 29-day deadline becomes a problem.
What if you hire subcontractors?
If you hire a subcontractor who is GST/HST registered, they should send you an invoice showing their legal or business name, description of work, GST/HST number, taxable amount, rate, tax charged, and total. Pay the invoice as billed and keep it with your records.
If your own business is registered, the GST/HST you pay to that subcontractor may be an input tax credit, assuming the expense is for your commercial activity and you have proper documentation. Our guide to GST/HST input tax credits explains what receipts and invoices need to show.
Example: you charge a client $8,000 plus HST for a project and pay a registered subcontractor $2,000 plus $260 HST. Under the regular method, the $260 may reduce the net HST you remit, provided the invoice is valid and the expense relates to your taxable work.
Do not charge HST just because your client does
Your obligation depends on your own GST/HST registration status. If the agency hiring you is registered, that does not automatically mean you must charge HST. If you are under the threshold and have not registered voluntarily, you generally invoice without GST/HST.
The reverse is also true: if you are registered, you generally charge GST/HST on taxable subcontractor services even if the business hiring you is small, unregistered, or not charging tax to its own customer. For help with invoice formatting, see our guide on how to invoice with HST as a Canadian freelancer.
Which rate applies?
For many services, the GST/HST rate depends on the place of supply — often the customer's province. If you are a BC subcontractor billing an Ontario agency for remote consulting, you may need to charge Ontario's 13% HST rather than only 5% GST, depending on the facts. Our guide to GST/HST place of supply rules covers the rate question in more detail.
Records to keep
- Subcontractor agreements and statements of work
- Invoices you send as a subcontractor
- Invoices you receive from subcontractors you hire
- GST/HST registration numbers shown on taxable invoices
- Notes on client province and tax rate used
- Proof of payment and any refunds or credit notes
The bottom line
- Registered subcontractors usually charge GST/HST on taxable services
- Unregistered small suppliers generally do not charge GST/HST
- Subcontractor income usually counts toward the $30,000 threshold
- GST/HST paid to registered subcontractors may be an input tax credit
- Your own registration status controls your invoice, not the agency's
Treat subcontracting like any other taxable business activity: invoice clearly, keep the GST/HST number trail, and track every taxable dollar as it happens. That way subcontractor work helps your business grow without creating a GST/HST surprise later.