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A Self Billing Agreement is a commercial arrangement where you, as the customer, take responsibility for generating invoices on behalf of your supplier. This reversal of the traditional billing process is legally recognized under Canadian law and can significantly streamline operations in business relationships involving regular, high-volume transactions. The agreement must comply with strict Canadian tax regulations, particularly the Excise Tax Act requirements for GST/HST documentation and provincial sales tax obligations.

When do you need this document?

You need a Self Billing Agreement when your business relationship involves frequent transactions that would benefit from centralized billing processes. This is particularly common in retail supply chains where large retailers process thousands of supplier transactions monthly, making traditional supplier-generated invoicing inefficient. Manufacturing companies often use self-billing when managing multiple component suppliers, allowing for better inventory management and payment processing. Service industries with recurring billing cycles, such as logistics or consulting arrangements, also benefit from this structure. Additionally, you may require this agreement when your accounting systems are more sophisticated than your supplier's, enabling better integration and automated processing.

Key legal considerations

Your Self Billing Agreement must clearly define each party's tax obligations under Canadian law, particularly GST/HST registration requirements and input tax credit eligibility. The supplier must retain the right to review and approve self-generated invoices before they become legally binding, ensuring accuracy and preventing disputes. You must establish robust record-keeping procedures that satisfy both the Income Tax Act and Excise Tax Act requirements, including maintaining detailed transaction records for the required retention periods. The agreement should specify dispute resolution mechanisms and audit procedures, as Canada Revenue Agency audits may examine both parties' records. Payment terms must be clearly defined, including any early payment discounts or late payment penalties, ensuring compliance with provincial commercial law.

Legal requirements in Canada

Under the Excise Tax Act, your self-billing invoices must contain all mandatory information required for GST/HST purposes, including both parties' business numbers, transaction details, and applicable tax amounts. You must ensure your supplier is properly registered for GST/HST before issuing self-bills, as this affects input tax credit claims. Provincial sales tax requirements vary by jurisdiction, so your agreement must address applicable provincial tax obligations in your operating provinces. Electronic self-billing systems must comply with the Electronic Commerce Act requirements for digital document validity and electronic signatures. The Personal Information Protection and Electronic Documents Act applies if you're processing personal information through your billing systems, requiring appropriate privacy safeguards. Both parties must maintain comprehensive records for the periods specified under federal and provincial tax legislation, typically seven years for most business transactions.