This article, written by Nav Pannu, CPA at DMCL, is taken from the quarterly Canadian News Digest, a newsletter published by the Canadian member firms of Moore North America. The article, about taxes on income from digital platforms such as Uber, AirBnB and Etsy, is part of our mission to be your partner in success by keeping you informed.
The Canada Revenue Agency (CRA) has introduced new Reporting Rules for Digital Platform Operators to enhance transparency and promote international tax compliance. These rules ensure income earned through digital platforms is accurately reported, marking a significant shift for both platform operators and individuals earning income through these platforms.
Overview of reporting rules
Under the new rules, digital platform operators facilitating transactions involving goods, services, or property rentals must collect and report detailed information about their sellers to the CRA. A platform operator is classified as a “reporting platform operator” if it either:
- Resides in Canada; or,
- Facilitates transactions involving Canadian residents, even if the operator itself is based abroad.
What information must be reported?
Platform operators are required to collect and report identification details (e.g., the seller’s name, address, and tax identification number) and transaction activity data (e.g., payment amounts, and platform fees).
Who is a reportable seller?
Sellers are considered “reportable” if they meet all three of the following criteria:
- They are registered on a digital platform (e.g., Airbnb, Etsy, or Uber);
- They reside in Canada or a country with similar reporting standards; and,
- They sell goods or services, including property rentals, to customers in Canada or other jurisdictions adopting these rules.
Key dates to remember
The first reporting deadline was January 31, 2025, covering activity from the 2024 calendar year. If you missed this deadline, penalties and interest won’t be charged if the return is filed late but submitted by July 31, 2025. Platform operators must collect and verify accurate seller information by the end of each reporting period.
Key takeaways for operators and sellers
For platform operators
Platform operators need to act quickly to ensure compliance with these reporting requirements. This includes:
- Implementing systems to accurately collect and verify seller information. For example, platforms like Uber may need to upgrade their systems to ensure driver data is complete and accurate; and,
- Meeting the January 31 reporting deadline (or filing by July 31) to avoid non-compliance penalties.
For sellers
Sellers should:
- Maintain accurate records of income earned through digital platforms such as Etsy or Airbnb;
- Ensure the information provided to platform operators, such as tax identification numbers and financial details, is up to date; and,
- Consult their CPA advisor about addressing past omissions or inaccuracies to minimize penalties.
Deadlines and penalties
The CRA considers your return to be filed on time if it’s received on or before the due date. If a penalty is applied for late filing, you will receive a notice. The minimum penalty for late filing the Part XX information return is $100, and the maximum penalty is $7,500.
If you fail to pay an amount owed, interest can be applied starting from the due date. The interest rate is the prescribed interest rate, which is determined quarterly and is compounded daily.
As mentioned above, for the initial filing deadline of January 31, 2025, penalties and interest won’t be charged if the return is filed late but submitted by July 31, 2025. Despite this temporary relief, it’s strongly encouraged to file on time to avoid potential issues in future filings.
Tax considerations
The new reporting rules also provide an opportunity for sellers to review and optimize their tax strategies. Consider the following:
Expense deductions
Sellers involved in short-term rentals or freelance work may be eligible to deduct related expenses, such as advertising costs, platform fees, or home office expenses, from their taxable income. For instance, an Airbnb host can deduct the cost of cleaning services or property repairs. Proper documentation is essential to claim these deductions.
Corporate structuring
Some sellers may benefit from structuring their activities through a corporation to take advantage of lower tax rates or better manage liability. Consult with your CPA advisor to determine if this strategy aligns with your broader financial and tax planning goals.
The Reporting Rules for Digital Platform Operators introduce significant administrative responsibilities for platform operators while underscoring the importance of accurate income reporting for sellers. Seeking tailored advice from your CPA advisor can help both operators and sellers navigate these new requirements effectively.
