The term Industry Code might sound like a complex term only required for large Canadian companies, but if you have self-employment income from a side-business, home-based business, freelance work, etc., you will need to choose an industry code for your personal tax return to help the Canada Revenue Agency (CRA) determine what kind of self-employment income you are earning.
What is an Industry Code?
Your industry code helps the Canada Revenue Agency (CRA) classify what kind the source of your self-employment income might be. Typically, the CRA, and Statistics Canada use industry codes for statistical purposes but the CRA also uses these codes in order to compare similar businesses within the same industry – their annual income, expenses claimed – which helps them discover trends which may be helpful in their auditing processes.
Industry codes are established and maintained by Statistics Canada and use the North American Industry Classification System (NAICS), which is a comprehensive system encompassing all economic activities.
Industry codes are grouped into broad categories, also known as generalized codes. The generalized codes are then subdivided into very specific industries.
How Do I Choose My Industry Code?
The Canada Revenue Agency (CRA) asks that you choose a code from the generalized list of codes and to choose your code, establish what the main activity of your business is, and find the code that comes closest to it.
If none of the generalized industry codes closely describes your main business activity, you can get a suitable code from the complete list of North American Industry Classification System codes (NAICS).
If there still is no specific code for exactly the kind of work you do; simply choose the code that matches best.
If, for example, you do more than one thing in your business, choose a code that matches your work’s main activity.
An example of that scenario might be; someone who operates a bookstore in which postage stamps are also sold. In this scenario, the most appropriate industry code would be 451210 (for sales – bookstores and news dealers), and not 491110 (for services – postal services).
Where Can I Find the List of Industry Codes to Choose From?
If you are filing your return through TurboTax, you have to use the industry codes from your tax preparation software.
Only use the NAICS industry codes if you are filing your General Income Tax and Benefits Return on paper. You can find the list of generalized industry codes on the CRA’s website.