News Share

The Tax Hub

Daily Tax Newsletter

Canada

16 March 2021

Responsive image

Canada Revenue Agency Publishes FAQ on Application of GST/HST in Relation to Electronic Commerce Supplies

The Canada Revenue Agency has published an FAQ dated 12 March 2021 on the application of the GST/HST in relation to electronic commerce supplies. The FAQ contains 15 questions and answers to explains the proposed GST/HST measures relating to the digital economy announced as part of the Fall Economic Statement 2020. The 6 questions providing the main details are as follows:

---

General Information

1. On November 30, 2020, the Government of Canada announced a number of proposed GST/HST measures relating to the digital economy. Generally, what are those measures and what is their overall effect?

Three GST/HST measures were proposed in the announcement. As explained in greater detail below, the three measures are related to:

  • Cross-border digital products and cross-border services;
  • Goods supplied through fulfillment warehouses in Canada; and
  • Platform-based short-term accommodation.

The current GST/HST rules can often result in the GST/HST not being required to be collected on online purchases from non-resident vendors or made through digital platforms. Generally, the proposed measures will result in the GST/HST being required to be collected on these types of purchases that are considered under the proposed measures to be for consumption in Canada.

2. When are the measures proposed to become effective?

Generally, the proposed measures would start to apply on July 1, 2021:

  • The digital products and services measure, and the short-term accommodation measure, would apply to the affected supplies to the extent that the consideration for these supplies becomes due on or after July 1, 2021, or is paid on or after that day without having become due.
  • The fulfillment warehouse measure would apply to the affected supplies made on or after July 1, 2021, and to those made before July 1, 2021 if all of the consideration becomes due on or after July 1, 2021, or is paid on or after that date without having become due.

3. The proposed measures refer to platforms. What does this mean?

Generally, a digital platform would be a website, an electronic portal, gateway, store or distribution platform or any other similar electronic interface, but would exclude an electronic interface that solely processes payments.

Generally, a distribution platform would be a digital platform through which a person facilitates the sales of property or services of third-party vendors, such as goods or mobile apps (also sometimes referred to as an online marketplace). An accommodation platform generally means a digital platform through which a person facilitates the making of supplies of short-term accommodation.

A distribution platform operator or accommodation platform operator in relation to supplies made through the platform is generally the person (other than the supplier) that either controls or sets the essential elements of the transaction between the supplier and the customer. If no such person exists, it is a person who is involved, directly or through arrangements with third parties, in collecting, receiving or charging the consideration for the supply and transmitting all or part of the consideration to the supplier.

Information For Businesses

4. What businesses would be affected by the measure relating to cross-border digital products and cross-border services?

Under the proposed measure, non-resident vendors supplying digital products or services (such as online subscription-based video streaming and including traditional services such as legal and accounting services) to consumers in Canada would generally be required to register for the GST/HST and to collect and remit the tax on their taxable supplies to Canadian consumers.

Distribution platform operators would generally be required to register for the GST/HST and to collect and remit the tax on the supplies of digital products and services (such as mobile apps) made by non-resident vendors to Canadian consumers that these digital platforms facilitate.

5. What businesses would be affected by the measure relating to goods supplied through fulfillment warehouses in Canada?

Under the proposed measure, distribution platform operators would be required to register under the normal GST/HST rules and to collect and remit the GST/HST in respect of sales of goods that are located in fulfillment warehouses in Canada (or shipped from a place in Canada to a purchaser in Canada), when those sales are made by non-registered vendors through distribution platforms.

Non-resident vendors would be required to register under the normal GST/HST rules and to collect and remit the GST/HST in respect of sales of goods that are located in fulfillment warehouses in Canada (or shipped from a place in Canada to a purchaser in Canada), when those sales are made by the non-resident vendors on their own (i.e., they are not made through a distribution platform).

Fulfillment businesses in Canada would be required to notify the CRA that they are carrying on a fulfillment business and to maintain records regarding their non-resident clients and the goods they store on behalf of their non-resident clients.

6. What businesses would be affected by the measure relating to platform-based short-term accommodation?

Under the proposed measure, the GST/HST would apply on all supplies of short-term accommodation in Canada facilitated through accommodation platforms.

The GST/HST would be required to be collected and remitted on short-term accommodations supplied in Canada through an accommodation platform by either the property owner or the accommodation platform operator.

Powerful Tax Tools

NEW

FX Rates

Global FX Rates including Tax Year Average FX Rates and Spot Rates for all Reporting Currencies.

NEW

Corporate Tax Rates

Corporate tax rates, surtaxes, and effective tax rates for the current year, as well as historical rates and approved future rates.

NEW

Country Analysis

Detailed tax guidance for companies doing business in over 100 countries, including summaries and snapshots of key tax facts and issues.

NEW

Cross Border Tax Calculator

Calculate total tax costs and benefits of a cross border transaction including withholding tax, participation exemption and foreign tax credit rules.

NEW

Cross Border Tax Rates

Provides Domestic, treaty and EU cross border tax rates for over 5,000 country combinations for 9 different payment streams.

NEW

OECD BEPS Project

Complete overview of the OECD BEPS Project, including daily BEPS news, country adoption of BEPS measures, and an overview of the 15 BEPS Actions.

NEW

Tax Calendar

Customizable calendar tool that tracks corporate income tax, value added tax and transfer pricing obligations by country or entity.

NEW

Tax Forms

English translations of key tax forms for over 80 countries, including tax return forms, treaty benefit forms, withholding tax forms, and more.

NEW

Worldwide Tax Treaties

Repository including thousands of tax treaties (in English), OECD, UN and US Models, relevant EU Directives, Technical Explanations, and more.

NEW

Worldwide Tax Planner

Calculates the worldwide tax cost of what-if scenarios based on legal entity structure, taxable income, and cross border transactions.

NEW

Certified Rates Report

Customizable Certified Rates Report providing updated corporate and withholding tax rates at the end of each month for over 100 countries.

NEW

Withholding Tax Minimizer

Enables quick calculation of tax costs and benefits of cross border transactions considering all possible transaction combinations and optimal routes.

NEW

VAT Rates

Provides value added tax (VAT) rates, goods and services tax (GST) rates and other indirect tax rates for over 100 countries.

NEW

NOL Calculator

Country specific calculator to determine how net operating losses can be utilized in carryback and carryforward years.

NEW

Transfer Pricing Calculator

Calculates TP ratios under various TP methods and calculates the difference between target ratios and actual ratios.

NEW

Individual Income Tax Rates

Individual tax rates for over 100 countries.

Play of the Day

Crosss Border Rates

Provides Domestic, treaty and EU cross border tax rates for over 5,000 country combinations for 9 different payment Streams.

We’re here to help

We’re here to answer any questions you have about the Orbitax products and services.

Send us a message

Who’s behind Orbitax?

We’re committed to providing high value, low cost tax research and management solutions.

Learn More