Article written by Demers Beaulne for Canadian News Quarterly, a newsletter published by the Canadian member firms of Moore North America. These articles are part of our mission to become the partner of choice for your success by keeping you up to date.
As part of its Fall 2020 Economic Statement, the Government of Canada has proposed new GST/HST registration rules for foreign-based vendors:
- GST/HST on the sale of digital products and cross-border services;
- GST/HST on the sale of goods supplied by the distribution warehouse business;
- GST/HST on short-term rentals via a platform.
The proposed changes will apply from July 1, 2021.
Context
Under current rules, non-resident vendors with no physical presence in Canada are not required to register and collect GST/HST on their Canadian sales.
Under the current rules, GST/HST is not collected most of the time on sales made online or via a platform by a non-resident vendor.
The Quebec government has implemented similar QST rules in 2019.
GST/HST on the sale of digital products and cross-border services
A new simplified GST/HST regime will be implemented. Non-resident vendors and distribution platform operators will be required to register for this new simplified system if their taxable sales of digital products or services to Canadian consumers exceed $30,000 CAD over a 12-month period.
This new obligation applies only to sales made to Canadian consumers. A consumer
Canadian is a person, or legal entity, who is not registered for GST/HST.
Registration and fee remittance will be handled via a new online portal. The new simplified system is a GST/HST collection system only. No tax credit will be available.
GST/HST on the sale of goods supplied by the distribution warehouse business
Non-resident sellers regularly use distribution warehouses in Canada to improve delivery times. These sellers also use distribution platforms to sell their goods in Canada.
The Canadian government is proposing to require distribution platform operators to register under the regular system and collect GST/HST on sales made by non-residents via distribution warehouses in Canada.
The Canadian government is proposing to require non-resident vendors to register under the regular system and collect GST/HST on sales made by non-residents via distribution warehouses in Canada.
These new rules apply if sales to Canadian consumers exceed $30,000 over the past 12 months. Non-resident vendors and platform operators will be able to claim input tax credits.
GST/HST will not apply on platform operator service fees to unregistered non-resident sellers.
To help the Canada Revenue Agency manage these new rules, platform operators will have to provide a report on sales made by non-resident sellers via their platform.
GST/HST on short-term rentals via a digital platform
GST/HST applies to short-term rentals of housing. For GST/HST purposes, short-term rentals generally include buildings or housing units rented to an individual for less than one month.
The Canadian government is proposing to apply the GST/HST to all short-term accommodation rentals in Canada via a digital platform. GST/HST will have to be collected and remitted for all short-term rentals either by the digital platform or by the unit owner.
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