Fact sheet – Personal services business

PDF, 181KB, 1 page
Type: Fact sheet
Last update: 2026-04-13

The Canada Revenue Agency has developed a fact sheet outlining the definition and tax obligations of personal services businesses.

Fact sheet description

Personal services businesses

Did you incorporate to provide services to another business?

Your corporation may be a personal services business (PSB). Tax obligations of PSBs differ from other corporations.

Your corporation likely operates a PSB if:

You, or a person related to you, is a specified shareholder of the corporation.
Your corporation provides services to another business (i.e. hiring company, client, other entity).
You would be considered an employee of the business you provide services to if your corporation did not exist.
Your corporation employs five or fewer full-time employees throughout the year.
Payments your corporation receives are not from an associated corporation.

Tax obligations of PSBs

A PSB must:

file a T2 Corporation Income Tax Return
issue T4 slips to its employees
file GST/HST returns if applicable

A PSB cannot:

claim the small business deduction
claim the general tax rate reduction
deduct the same expenses as other corporations

A PSB must pay:

the full federal and provincial corporate tax rates
an additional 5% tax on PSB income

The Canada Revenue Agency is reviewing PSBs, particularly those in the trucking industry, to identify non-compliance. PSBs that do not meet their tax obligations can face reassessments and penalties.

To help accurately report income, PSBs should receive a T4A slip from their hiring business by the end of February that reports the amounts paid to them in the previous calendar year.

Learn more about PSBs:
canada.ca/personal-services-business

French fact sheet

Entreprise de prestation de services personnels

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2026-04-14

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Fact sheet – Personal services business

French fact sheet

Other languages

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