If you’re a foreign company selling goods or services online in Canada, you should be aware of the latest GST/HST filing requirements for e-commerce transactions. The new Goods and Services Tax/Harmonized Sales Tax (GST/HST) registration requirements for non-residents of Canada are expected to become law with a retroactive date of July 1, 2021. These new rules are in response to the cross-border digital supply of products and services to Canadian customers by non-residents.
Historically, non-residents were required to register to collect GST/HST if they were carrying on business in Canada and making taxable sales of goods and services. Generally, whether a non-resident was “carrying on business “ was based on a number of factors including the non-resident being physically present in Canada selling goods or providing services to Canadian customers and the sale of those goods/services exceeded the “small supplier” threshold of $30,000 CAD in a twelve-month period. Canada has modernized its laws to capture the GST/HST on sales of digital goods and services, and is now holding digital platform providers responsible for collecting taxes on these sales.
Here is a general overview of the new rules:
- Small Business Exception – Sales of digital goods and services exceeding the small supplier threshold of $30,000 will result in the non-resident seller having to register for GST/HST if the purchaser is NOT a GST/HST registrant. This means that sellers should request the buyer’s GST/HST registration number to confirm that they are registered. This is an important consideration if you are making sales to not-for-profit entities, entities that meet the small business exception, or individual consumers.
- Platform Operators – Platform operators, businesses who provide platforms that businesses use to make sales to consumers, now have joint and severable liability to collect GST/HST on the sales they facilitate for others.
- GST – GST of 5% only is in effect for Alberta, Northwest Territories, Nunavut, and Yukon.
- HST – HST is in effect in Ontario (13%), New Brunswick (15%), Newfoundland and Labrador (15%) Nova Scotia (15%) and Prince Edward Island (15%).
- GST plus PST – British Columbia, Manitoba, and Saskatchewan have GST of 5% plus provincial sales tax (PST) in effect. The PST is administered by each individual province. Non-resident businesses meeting the filing thresholds established by each province would be subject to collecting the PST when selling to the end-user consumer and businesses unless the good/service is being purchased for resale.
- GST plus QST – GST plus Quebec sales tax (QST) will apply to sales of taxable digital goods and services. These rules are similar to the GST/HST rules. The combined rate including GST for Quebec is 14.975%.
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Non-compliance with these rules can result in very large tax liabilities very quickly. If you need assistance in determining whether your business is responsible for the collection of these taxes, please contact us.