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:
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:
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:
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.