Why setting up your own business after graduation is a really, really bad idea for international students in Canada

June 2019

We recently had a client come to us for a consultation appointment. Her post-graduation work permit is expiring in November of this year.  Since graduating with her master’s degree in 2016, she had been working at building her own business.  The client started her own business as this was the norm for those in her profession.  She had registered the business and was doing well.  She had many clients and was paying Canadian income taxes. 

The client wanted to apply for permanent residency in Canada. She was 38 years of age.  She scored well on the English language exam.  Her plan was to apply through the Express Entry application management system.

During the consultation appointment, the client was shocked to learn that her self-employed work experience in Canada was worthless.

Why?

The Canadian Experience Class is a special program designed for individuals who have obtained one year of work experience in a skilled position in Canada. Candidates are eligible for this program if they obtain one year of Canadian work experience in a skilled position.  Unfortunately, self-employment in Canada does not count as skilled work experience.  This is set out in section 87.1(3) of the Immigration and Refugee Protection Regulations:

(b) any period of self-employment or unauthorized work shall not be included in calculating a period of work experience

Further, paragraph 15 (7) (b) of the Ministerial Instructions respecting the Express Entry system states that in calculating points for Canadian work experience, ‘A period of self-employment or unauthorized work is not to be included in calculating a period of work experience.’

It is also not possible to obtain points for self-employed work as ‘foreign work experience’.   The Ministerial Instructions specifically state that this work must be done outside of Canada: 

25 (1) For the purposes of sections 23 and 24, foreign work experience is work experience that

(a) is acquired by a foreign national outside Canada in one or more occupations listed in Skill Type 0

Since self-employed work in Canada cannot be counted as skilled work experience in Canada, and it cannot be considered foreign work experience, self-employed work in Canada is not awarded any points under the Express Entry system. Without these points, many international students, especially those who get reduced points for age, will find they do not rank high enough to be drawn from the Express Entry pool of applicants. 

In some specific situations, it might be possible to technically be self-employed, but not be considered as such for the purpose of immigrating to Canada. The Program Delivery Instructions for the Express Entry application management system entitled  Canadian Experience Class selection criteria - Qualifying work experience states the following:

In determining whether an applicant under the CEC was an employee or a self-employed individual during their period of qualifying work experience in Canada, CIC officers should consider factors such as:

  • the degree of the worker’s control or autonomy in terms of how and when work is performed, and the method(s) used to do the work;

  • whether the worker owns and/or provides tools and equipment to accomplish the work;

  • the degree to which the worker has to perform the work personally and whether the worker has the option of subcontracting work or hiring others to help and assist with completing the work;

  • the degree of financial risk assumed by the worker, including whether the worker is required to make any investment in order to complete the work or provide the service and whether the worker is free to make business decisions that affect his/her ability to realize a profit or incur a loss (as opposed to the opportunity to earn commissions or other productivity bonuses); and

  • any other relevant factors, such as written contracts.

Further, there is a program for self-employed athletes and those engaged in cultural activities, but this, of course of limited applicability.

There are also provincial nomination programs, but these are of limited scope and have small quotas. It can be challenging to find a program that is open, and that has relevant eligibility criteria.

Working for an employer in Canada for a year prior to setting up her own business would have allowed her to apply under the Canadian Experience Class, with enough Express Entry points to be invited to apply for permanent residency. Unfortunately, with only months left in her work permit’s validity period, she has few options. Post-graduation work permits cannot be extended. She will only be able to continue working in Canada if she can meet the eligibility for another type of work permit.

The lesson to be learned from this client’s story is to get legal advice early, before starting down any kind of path that involves self-employment. Unless your employer is taking income tax deductions from your pay, and issues you a T4 statement for income tax filing purposes, you could be considered self-employed and are putting your permanent residency dreams in jeopardy.