Managing finances for non-resident businesses outside of Canada can be complicated. Our team at SLF can help you better understand what your obligations are. This article goes over GST/HST changes for Canadian and non-resident businesses proposed in Canada’s 2020 Fall Economic Update.
Effective on July 1st, 2021, new GST/HST rules will be in place for some Canadian and non-resident businesses. Affected suppliers and platform operators that facilitate supplies of intangible personal property (IPPs), services, qualifying tangible personal properties (qualifying TPPs) and short-term accommodation will be required to register and collect GST/HST.
NON-RESIDENT SUPPLIERS AND PLATFORM OPERATORS
Non-resident suppliers, distribution platform operators and accommodation platform operators that are not currently registered for GST/HST purposes will be subject to special proposed rules as of July 1st, 2021. They must consider whether the supplies made directly or facilitated through their platforms qualify as IPPs, services, qualifying TPPs or short-term accommodation, as well as whether they meet the $30,000 minimum revenue threshold. Your SLF advisor can help you determine whether you must register under the regular GST/HST registration regime, or the new proposed simplified registration regime.
NEW SIMPLIFIED REGIME
IPPs and Services
Non-resident suppliers of IPPs and services, as well as distribution platform operators that facilitate taxable supplies of IPPs and services made by non-resident suppliers through their platforms will generally be required to register under the new simplified GST/HST regime and to collect GST/HST if the non-resident business:
- is not registered or required to be under the regular GST/HST registration regime; and
- makes over $30,000 of taxable supplies of IPPs, services or qualifying TPP (see section Qualifying TPPs on page 2) over a rolling 12-month period (on their own or through their online platform) to non-registered Canadian consumers;
Note that for the purpose of determining the $30,000 threshold, the non-resident suppliers should not include supplies that are facilitated by a distribution platform operator if the operator is registered for GST/HST purposes (under the regular or new proposed simplified regime).
Accommodation platform operators that facilitate taxable supplies of short-term (generally less than a month) accommodations in Canada made by a non-registered supplier (whether resident of Canada or not) will be required to register under a new simplified GST/HST regime and to collect GST/HST if:
- the accommodation platform operator is not registered or required to be registered under the regular GST/HST registration regime;
- the total value of the consideration for short-term accommodation situated in Canada made by non-registered person through the platform to non-registered Canadian consumers exceeds $30,000 over a rolling 12-month period; and
- the recipient has not provided to the accommodation platform operator evidence that it is registered under the regular GST/HST regime.
Note that if the accommodation platform operator (including resident of Canada) is already registered under the regular regime, it will be deemed to have made all supplies of short-term accommodation situated in Canada made by persons that are not registered under the regular GST/HST regime and facilitated through the platform it operates, and therefore to collect and remit applicable taxes on these supplies.
No Input Tax Credits and Simplified Compliance
Under the new simplified GST/HST regime, a registrant will not be eligible to claim input tax credits (ITCs) for the GST/HST paid on its expenses in Canada.
Furthermore, the administrative burden related to the GST/HST compliance is reduced under the new simplified GST/HST regime (simplified registration process, simplified returns, possibility to pay in foreign currencies under certain conditions, etc.).
New Rules Under the Regular Regime Qualifying TPPs
Non-resident suppliers of qualifying TPPs, as well as distribution platform operators that facilitate taxable supplies of qualifying TPPs made by non-registered suppliers (whether the suppliers reside in Canada or not) will generally be required to register under the regular GST/HST regime and to collect GST/HST if:
- in the case of a non-resident supplier, it makes over $30,000 of qualifying TPP supplies over a rolling 12-month period to non-registered Canadian consumers; and
- in the case of a distribution platform operator (whether resident or not), the total value of the consideration for qualifying TPP supplies made by non-registered suppliers (whether resident or not) through the platform to non-registered Canadian consumers exceeds $30,000 over a rolling 12-month period.
Note that a qualifying TPP supply is a supply, by way of sale, of TPP that is to be delivered or made available to the recipient in Canada, but does not include exempt or zero-rated supplies, as well as supplies of TPP to be sent by mail or courier from outside Canada.
Information Return for Platform Operators and Warehouses
Accommodation platform operators and distribution platform operators (with respect to qualifying TPP supplies only) will be required to file with the Canada Revenu Agency (CRA) an information return for the calendar year.
Furthermore, any person providing a service of storing TPP in Canada that are offered for sale by a non-resident person (except if the storage is incidental to the supply of a freight transportation service) will be required to notify the CRA of such activity and to maintain records containing specified information.
It is to be noted that some of these rules were already effective as of January 1st, 2020 or September 30th, 2020 for QST. In other words, where the GST rules apply to non-resident of Canada, the QST rules apply to non-resident of Quebec (resident of Canada or not).
However, further to the publication of the new proposed GST/HST rules described above, the Ministry of Finance of Quebec has drafted new QST rules which were, on June 4th, 2021, sanctioned by the Quebec National Assembly (amendment to Bill 90). These new QST rules will be effective July 1st, 2021 and are intended to completely harmonize the QST rules with those of the GST/HST summarized within this publication.
Your SLF advisor can help you determine the effect of these new GST/HST and QST rules on your business and provide guidance on how this development will affect your sales. Contact your SLF advisor today.