Non-Resident Vendors: You May Be Required to Register for GST/HST

In the 2020 Fall Economic Statement, Canada’s Finance Minister announced new Goods and Services Tax (GST)/Harmonized Sales Tax (HST) rules regarding the requirements for non-resident vendors to register for GST/HST purposes.

As a result, non-resident vendors of digital products and services, those selling goods via fulfillment warehouses in Canada, and operators of short-term accommodation platforms should take note of these new changes.

Cross-border digital products and services

Foreign-based vendors selling digital products or services to consumers in Canada and digital marketplace platform operators that facilitate those sales through their distribution platforms will be required to register for, collect, and remit the GST/HST on taxable sales made to Canadian consumers.  This requirement will apply to vendors and platforms whose annual supplies to consumers in Canada exceed $30,000 CAD.

These vendors and platforms will be able to register under a simplified regime if they wish or choose to register under the general regime (like the measures introduced by the province of Quebec in 2019).

Foreign-based vendors who have sales in Canada and distribution platform operators who facilitate those sales should inquire about this new requirement, determine if it is applicable to your business and evaluate which of the registration regimes would be the most beneficial to you.

The effective date for this new requirement is July 1, 2021.

Good supplied through fulfillment warehouses in Canada

Subject to exceptions, distribution platform operators will be required to register under the general regime (as opposed to the simplified one referred above) and to collect and remit GST/HST in respect of sales of goods located in warehouses in Canada if these sales are made through their platforms by non-registered vendors.

Foreign-based vendors using Canadian fulfillment warehouses to sell in Canada without the use of a distribution platform (e.g. using their own website) will also be required to register for and collect GST/HST under the general regime.

This registration requirement will apply to vendors and platforms whose annual supplies to consumers in Canada exceed $30,000 CAD.

Fulfillment businesses in Canada will be required to notify the Canada Revenue Agency (CRA) of their activities and maintain certain records related to non-resident clients. Distribution platform operators will also be required to report information to the CRA on third-party vendors using their platforms.

Foreign-based vendors who sell goods in Canada either directly or through distribution platforms, fulfillment warehouses in Canada and distribution platforms operators should inquire about these new requirements and determine whether they are applicable to your business.

The effective date for these new requirements is July 1, 2021.

Platform-based short-term accomodation

GST/HST will apply on all supplies of short-term accommodation in Canada facilitated by a digital platform.  This GST/HST will have to be collected and remitted either by the property owner (if registered for GST/HST) or by the platform operator (if the owner is not registered).

Non-resident accommodation platform operators who are not considered to be “carrying on business in Canada” under the existing rules and making supplies to consumers will be entitled to use the simplified registration framework.

This registration requirement will apply to accommodation platforms that facilitate more than $30,000 CAD of annual supplies to consumers in Canada when the underlying property owners are not registered for GST/HST.  It is to be noted that property owners making more than $30,000 per year in short-term accommodations are also required to register for GST/HST under the general regime.

Property owners making supplies of short-term accommodation as well as short-term accommodation platforms should inquire about this new requirement and determine whether it is applicable to your business.

The effective date for this new requirement is July 1, 2021.

Face masks and shields

The Fall Economic Update also announced the temporary zero-rating of certain face masks and face shields effective December 7, 2020, until such time as their use is no longer broadly recommended by public health officials for the COVID-19 pandemic.  Certain criteria must be met for this relief to be applicable.

Quebec has announced that the same relief will apply for Quebec Sales Tax purposes.

Business operators should ensure that the conditions for this relief are met before applying it in billing systems.

Do not forget – QST restrictions phase-out

As previously announced by the government of Quebec, effective January 1, 2021, the input tax refund (“ITR”) restrictions applicable to large businesses do not apply anymore.

Therefore, large businesses are now entitled to claim full ITRs on the previously restricted items.

This is a good opportunity to review the ITRs claimed with respect to these restricted items for the last four years to ensure you have complied with the phase-out calendar.

CONTACT OUR COMMODITY TAX EXPERTS:

Martin Gilbert: 514.934-3443 or MGilbert@richter.ca

Stéphane Marcassa: 514.934.3412 or SMarcassa@richter.ca