Completely different Meanings

Personal Services Income means something completely different in Canada

Canada - Personal Services has to do with:

1. how much control over the work a contractor has
2. ownership of tools
3. the chance of profit or risk of loss that a contractor is exposed to
4. the degree of integration .     

According to the Canada Revenue Agency (CRA) a personal services business is a corporation that provides services performed by individuals for the corporation, or a person related to the individual providing the services is a shareholder of the corporation, providing services to another entity provided there are not more than 5 employees working for the company, and providing personal service during a tax year.


If the individual providing the services is a contractor and not an employee, it will not be as likely that the corporation will be considered as a personal services business by the CRA.


It is very common for IT and other business consultants to be considered as running a personal services business.


Since personal services business income is not considered active income by the CRA, it does not qualify for deductions such as the small business deduction which is only available if the business is earning ‘active income’.

Additionally, the income from a personal services business is taxed at a personal business tax rate which is quite high (20% to 58% depending on the province).  The business may also not qualify to claim various business expenses as deductions (such as bad debts, bank charges, interest or insurance expenses, or any other general/common business expense).

A Personal Services Business is essentially an incorporated employee. For example, you work as an in-house doctor for a hospital and have heard about all the advantages to incorporating a professional corporation. So you incorporate and then enter into a contract with the hospital stating you are not a professional corporation and are to be paid as such.

From the Canada Revenue Agency’s point of view, you are running a personal services business. The easiest way to think about it is without the corporation, would you reasonably be considered an employee of the hospital.

What this means is that you are not eligible for any of the advantages that come along with incorporation which include the small business deduction and ability to deduct certain expenses.


In the US Personal Services Income is almost a completely different subject:
https://www.investopedia.com/terms/p/personal-service-activity.asp
"DEFINITION of 'Personal-Service Activity'Any business enterprise with the primary purpose of providing personal services. Personal-service activities encompass a wide range of professions, including law, medicine, engineering, design, finance, accounting and even performing arts. As the name implies, a personal-service activity focuses on directly providing a personalized service, such as legal advice or medical treatment, to an individual or group for compensation. Personal-service activities do not require the use of capital in order to generate material income."


Read more: Personal-Service Activity https://www.investopedia.com/terms/p/personal-service-activity.asp#ixzz4zm1oK2mJ 
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