Introduction: Canadian Tax Rules for Rideshare Drivers & Delivery Drivers
The platform economy involves activities facilitated by digital platforms like websites or mobile apps. Two common activities in the platform-economy sector are (1) commercial-ridesharing services, such as Uber and Lyft and (2) app-based delivery services, such as UberEats, DoorDash, Grubhub, and Postmates.
Ridesharing, part of the sharing economy, involves self-employed drivers who provide passenger transport through apps like Lyft and Uber. Delivery services, part of the gig economy, involve short-term contracts where self-employed drivers deliver goods to customers who place orders through apps like UberEats and SkipTheDishes.
Canadian drivers face different Canadian tax obligations depending on whether they offer ridesharing services, delivery services, or both. In other words, Canada's income-tax rules and GST/HST rules impose different obligations upon a Canadian who solely provides ridesharing services as an Uber driver than upon a Canadian who solely provides delivery services as a DoorDash driver.
This article provides an overview of the Canadian income-tax rules and GST/HST rules that apply to rideshare drivers, on the one hand, and delivery drivers, on the other. It then concludes by offering pro tax tips from our esteemed Canadian tax lawyers.
Income-Tax & GST/HST Obligations for Commercial-Rideshare Drivers
A rideshare driver's fares are taxable as business income under Canada's Income Tax Act. So, if you drive for a ridesharing service, such as Uber or Lyft, whether full-time or part-time, you must report all income, including tips, on your Canadian T1 income-tax return. As a self-employed individual, you may claim business expenses such as platform fees and other costs, including fuel (or electricity) and other operating costs, related to earning income as a rideshare driver. A self-employed rideshare driver must file a Canadian T1 General Income-Tax Return for each taxation year by June 15th of the following year, and the income-tax owing for a particular tax year must be paid by April 30th (prior to the June 15 filing date).
Canada's Excise Tax Act imposes GST/HST on every "taxable supply made in Canada." A "taxable supply" essentially refers to any commercial activity—including ridesharing services. From the moment you start earning money from ridesharing, you must register for a GST/HST account. (The small-supplier exemption doesn't apply to rideshare drivers.) You need to charge GST/HST on all fares, collect that GST/HST, and remit that GST/HST to the Canada Revenue Agency (CRA). A GST/HST-registered rideshare driver may recoup any GST/HST paid on the driver's own business expenses by claiming those amounts as an input tax credit (ITC), thereby reducing the driver's net GST/HST payable to the Canada Revenue Agency. A self-employed rideshare driver must file GST/HST returns for each reporting period—even if the driver earned no revenue during that period or had no net GST/HST payable for that period.
Income-Tax & GST/HST Obligations for Delivery Drivers
A delivery driver's income-tax obligations are essentially the same as a rideshare driver's obligations. A delivery driver's fees are taxable as business income under Canada's Income Tax Act. So, a UberEats, DoorDash, Grubhub, or SkipTheDishes driver, whether full-time or part-time, must report all income, including tips, as business income on an income-tax return. As a self-employed individual, you can claim business expenses such as platform fees and other costs related to earning income as a delivery driver. A self-employed delivery driver must file a Canadian T1 General Income-Tax Return for each taxation year by June 15th of the following year, and the income-tax owing for a particular tax year must be paid by April 30th (prior to the June 15 filing date). Learn more about Uber income tax and HST.
In contrast to a rideshare driver, a delivery driver need not register for GST/HST unless the driver earns $30,000 or more in worldwide gross revenue. A Canadian business earning less than $30,000 in annual gross revenue constitutes a "small supplier." And under paragraph 240(1)(a) of Canada's Excise Tax Act, a small supplier need not register for—and thus need not collect—GST/HST. (This doesn't apply to a rideshare driver. Regardless of how little the rideshare driver earns in gross annual revenue, a rideshare driver must register for GST/HST.)
If earning $30,000 or more in gross revenue, a self-employed delivery driver must register for a GST/HST number with the CRA, charge GST/HST on services, collect that GST/HST, and pay it to the CRA. As with a GST/HST-registered rideshare driver, a GST/HST-registered delivery driver may recoup any GST/HST paid on the driver's own business expenses by claiming those amounts as ITCs, thereby reducing the driver's net GST/HST payable to the Canada Revenue Agency.
A delivery driver who earns less than $30,000 may still voluntarily register for GST/HST so that the driver can claim input tax credits on GST/HST paid on related expenses. Regardless of whether the driver voluntarily registered or was obligated to register, a GST/HST-registered delivery driver must file GST/HST returns for each reporting period—even if the driver earned no revenue during that period or had no net GST/HST payable for that period.
Comparison of Canadian Tax Obligations: Rideshare vs Delivery Services
This table compares the Canadian tax obligations for drivers who offer ridesharing services, those who offer delivery services, and those who offer both:
| Rideshare Drivers | Delivery Drivers | Drivers Doing Both | |
|---|---|---|---|
| Income Tax | A self-employed rideshare driver must file a T1 income-tax return reporting all business income and may claim business expenses. | A self-employed delivery driver must file a T1 income-tax return reporting all business income and may claim business expenses. | The driver must file a T1 income-tax return reporting all business income from both activities (ridesharing and deliveries) and may claim business expenses. |
| GST/HST | A self-employed rideshare driver must register for
GST/HST (regardless of the amount of annual revenue); must charge,
collect, and remit GST/HST on all fares; and must file a GST/HST
return for each reporting period.
A GST/HST-registered driver may claim input tax credits for GST/HST paid on qualifying expenses. |
If earning less than $30,000 annual gross revenue,
a delivery driver need not register for GST/HST but may do so
voluntarily.
If earning $30,000 or more in annual gross revenue, a self-employed delivery driver must register for GST/HST; must charge, collect, and remit GST/HST on all fares; and must file a GST/HST return for each reporting period. A GST/HST-registered driver (whether voluntary or obligatory) may claim input tax credits for GST/HST paid on qualifying expenses. |
The driver must register for, collect, and remit GST/HST on all fares from commercial ridesharing services. If the combined gross revenue from both activities (ridesharing and delivery) don't exceed the small-supplier threshold, the driver may extend the GST/HST registration to delivery services, thereby requiring the driver to collect and remit GST/HST on all sales from both activities. The driver may claim input tax credits for GST/HST paid on qualifying expenses relating to ridesharing services. If the driver extends GST/HST-registration to the delivery services or if the combined gross revenue from both activities (ridesharing and delivery) exceeded the small-supplier threshold, the driver may claim input tax credits for GST/HST paid on qualifying expenses relating to delivery services. |
Pro Tax Tips – Tax Record-Keeping Requirements & Voluntary Disclosures Program (VDP)
Uber drivers, Lyft drivers, UberEats drivers, DoorDash drivers, Grubhub drivers, Postmates drivers, and all other self-employed Canadian rideshare and delivery driver must maintain adequate records for tax purposes. Section 230 of Canada's Income Tax Act mandates that every taxpayer in Canada must keep proper records and books. This requirement applies to anyone conducting business or anyone who needs to pay or collect income tax, including other amounts like interest penalties or vicarious tax liability under section 160 of the Income Tax Act. The records must be detailed enough to determine the amount of income tax payable or any amount that should have been deducted, withheld, or collected. Taxpayers must keep these records at a residence or place of business in Canada.
Section 230 also specifies that taxpayers must retain these records for at least six years after the end of the last tax year to which they relate. In practice, this often means keeping records for much longer than six years. For example, suppose that a Lyft driver purchased a business-use vehicle in 2016 and claimed motor-vehicle expense relating to that vehicle in 2022. The driver's 2016 records concerning the vehicle purchase will relate to the vehicle expenses claimed in the 2022 taxation year. So, the driver must retain the 2016 purchase records for at least the six years following 2022—that is, until at least 2028!
Failing to maintain proper records constitutes a summary-conviction criminal offence under section 238 of Canada's Income Tax Act. Non-compliance can result in a fine ranging from $1,000 to $25,000 and up to 12 months of imprisonment. Additionally, the Canada Revenue Agency may impose gross-negligence penalties. Our experienced Canadian tax lawyers can assist if you face charges under the Income Tax Act.
Furthermore, paragraph 169(4)(a) of Canada's Excise Tax Act precludes a registrant from claiming an input tax credit (ITC) "unless, before filing the return for which the credit is claimed, the registrant has obtained sufficient evidence in such form containing such information as will enable the amount of the input tax credit to be determined, including any such information as may be prescribed." That is, "before filing" the GST/HST return claiming the ITC, the registrant must obtain documentary evidence substantiating the ITC.
The Input Tax Credit Information (GST/HST) Regulations specify the exact documentation needed to substantiate ITCs. Generally, to support ITCs, a registrant must obtain documents listing the following details:
- The name of the supplier charging the GST/HST.
- The total amount paid or payable to that supplier.
- The amount of GST/HST paid or payable.
- The date the GST/HST was paid or became payable.
- The supplier's GST/HST registration number.
- The terms of payment.
- A description sufficient to identify each supply.
Typically, invoices, receipts, and contracts will provide this information.
Credit-card statements, bank-account statements, and cancelled cheques alone do not provide all the necessary details. While they may show that a payment was made, they don't confirm whether the payment included GST/HST. Therefore, taxpayers must supplement these statements with invoices, receipts, and contracts to meet the documentation requirements.
If you neglected to register for GST/HST, if you claimed ineligible ITCs, or if you filed Canadian income-tax returns that omitted or underreported your rideshare fares, delivery-service fees, and tips, or that claimed ineligible expenses, you risk facing not only civil monetary penalties, like gross-negligence penalties, but also criminal liability for tax evasion.
But you might be eligible for relief through the CRA's Voluntary Disclosures Program (VDP). If your VDP application qualifies, the Canada Revenue Agency will forgo criminal prosecution and waive gross-negligence penalties, and it may also cancel or waive interest. But the CRA will reject any application that isn't "voluntary," meaning you must submit your VDP application before the Canada Revenue Agency contacts you about the non-compliance you intend to disclose. So, you can't delay.
Our expert Canadian tax lawyers have successfully assisted many Canadian rideshare and delivery-service drivers with unreported income and unremitted GST/HST. We can strategically plan and swiftly prepare your VDP application. A well-prepared voluntary-disclosure application not only boosts the chances of obtaining tax amnesty from the CRA but sets the stage for a judicial-review application to the Federal Court if the CRA unjustly denies your VDP application.
To find out whether you qualify for the CRA's Voluntary Disclosures Program, schedule a confidential and privileged consultation with one of our experienced Canadian tax lawyers. The Canada Revenue Agency cannot force the disclosure of information protected by solicitor-client privilege. This legal privilege ensures that the CRA cannot access the confidential legal advice you receive from your Canadian tax lawyer. Since no such privilege covers accountants, your communications with an accountant remain unprotected. Therefore, to keep your tax advice confidential from the CRA, you should first consult with our Canadian tax lawyers. If you need an accountant, we can retain one on your behalf, extending our solicitor-client privilege.
FREQUENTLY ASKED QUESTIONS
I'm a self-employed SkipTheDishes delivery driver. What are my income-tax obligations?
A delivery driver's income-tax obligations are essentially the same as a rideshare driver's obligations. A delivery driver's fees are taxable as business income under Canada's Income Tax Act. So, a UberEats, DoorDash, Grubhub, or SkipTheDishes driver, whether full-time or part-time, must report all income, including tips, as business income on a income-tax return. As a self-employed individual, you can claim business expenses such as platform fees and other costs related to earning income as a delivery driver. A self-employed delivery driver must file a Canadian T1 General Income-Tax Return for each taxation year by June 15th of the following year, and the income-tax owing for a particular tax year must be paid by April 30th (prior to the June 15 filing date).
I'm a self-employed Uber rideshare driver. I've heard that I don't need to register for GST/HST unless I make at least $30,000 annually. Is that correct?
No, that is not correct. The $30,000 small-supplier exemption doesn't apply to rideshare drivers. From the moment you start earning money from ridesharing, you must register for a GST/HST account, and you need to charge GST/HST on all fares, collect that GST/HST, and remit that GST/HST to the Canada Revenue Agency. A GST/HST-registered rideshare driver may recoup any GST/HST on the driver's own business expenses by claiming those amounts as an input tax credit (ITC), thereby reducing the driver's net GST/HST payable to the Canada Revenue Agency. A self-employed rideshare driver must file GST/HST returns for each reporting period—even if you earned no revenue during that period or had no net GST/HST payable for that period.
For advice on GST/HST obligations relating to commercial-rideshare services, consult with one of our skillful Canadian tax lawyers today.
For the last several years, I've been working as an Uber driver and making deliveries for UberEats. I've never registered for GST/HST, and I haven't filed any Canadian income-tax returns reporting my rideshare income and delivery income. What can I do?
You might qualify for relief under the Canada Revenue Agency's Voluntary Disclosures Program (VDP). If your VDP application qualifies, the CRA will renounce criminal prosecution and waive gross-negligence penalties (and may reduce interest). For more information about qualifying for relief under the VDP, read our article on the CRA Voluntary Disclosures Program. A VDP application is time sensitive. The CRA's Voluntary Disclosures Program will reject an application—therefore denying any relief—unless the application is "voluntary," meaning that the Voluntary Disclosures Program must receive your VDP application before the Canada Revenue Agency contacts you about any of the non-compliance you seek to disclose. So, don't delay. Schedule a confidential and privileged consultation with one of our expert Canadian tax lawyers today.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.