CROSS BORDER RESOURCES

GST/HST: Do Non-Residents Rendering Services in Canada have to Register?

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What are the General GST/HST Rules in Canada?

Generally, taxable supplies sold in Canada are subject to the Goods and Services Tax (GST/HST).

  • Tangible assets manufactured in Canada or sold by an entity registered for GST/HST are subject to GST/HST.
  • Tangible assets imported to Canada are generally subject to GST when they enter Canada.  It is collected at the time of importation, at the same time as the duty and excise tax.
  • Intangible services are subject to GST/HST if the services are provided in Canada.

If your entity is located outside of Canada, generally you are not obligated to register for GST/HST. If your entity is based in Canada, read on to determine your GST/HST registration requirements.

 

What are the CRA GST/HST 2021 changes?

Starting July 1, 2021, non-resident providers of digital products and services to unregistered customers located in Canada, and non-resident operators of digital platforms, including online shops and marketplaces, are required to register for GST/QST.

These changes aim to create a level playing field for domestic and foreign sellers. If you have a digital platform, or are a service provider, or a seller of goods through a fulfillment warehouse, or an operator of a short-term accommodation/rental platform, you should review these changes.

This obligation to charge GST/HST is limited to the supply from business to consumer, and does not extend to the supply from business to registered business. Accordingly, a non-resident entity will not be obliged to charge GST/HST if the entity acquiring the supply provides its GST/HST number to the non-resident seller.

Under this new system, non-residents selling to Canadians online are not entitled to input tax credits (ITC’s) or rebates.

Similar to existing rules, the GST/HST registration threshold starts at $30,000 of sales in a 12-month period. This applies to the following types of supplies:

    1. Sale of cross-border digital products and services 
    2. Sales of goods through fulfillment warehouses 
    3. Sale of short-term accommodation via digital platforms 

The Canada Revenue Agency (CRA)  has an online portal to register, file, and remit taxes.

 

What GST/HST override rules apply to non-residents?

There is a “non-resident override rule” that might make you exempt from GST/HST. This rule provides that a supply made by an unregistered non-resident is not considered subject to GST/HST if the seller is not “carrying on business in Canada”.

Carrying on Business in Canada: Canadian law does not provide a definition of what constitutes “carrying on business” in Canada. To help determine whether you are “carrying on business in Canada”, the CRA uses the following 12-point checklist :

  • The place where agents and employees of the non-resident are located;
  • The place of delivery;
  • The place of payment;
  • The place where purchases are made or assets acquired;
  • The place from which transactions are solicited;
  • The location of assets or an inventory of goods;
  • The place where business contracts are made;
  • The location of a bank account;
  • The place where a non-resident’s name and business are listed in a directory;
  • The location of a branch or office;
  • The place where the services are performed; and
  • The place of manufacture or production.

The CRA procedure is that the relevance of a given factor listed depends on the nature of the business activity under review and the particular facts and circumstances of each case.

Based on your analysis, you will need to determine whether you have a significant presence in Canada, sufficient to conclude that you will be carrying on business in Canada for GST/HST purposes.

 

What are Provincial Sales Taxes?

E-commerce and other businesses may be subject to provincial sales tax in some provinces, including Quebec, British Columbia, Saskatchewan, and Manitoba.

 

Conclusion:

If you conclude that you are “carrying on a business in Canada”, you are required to register for GST/HST, and you are responsible for charging and collecting the GST/HST on your Canadian sales. You will also be eligible to claim input tax credits for GST/HST paid on Canadian expenses.

Note that a non-resident entity registering with the CRA for GST/HST may be required to provide a security deposit.

 


 

Need Help?

We have expertise in assessing GST/HST filing requirements for non-residents rendering services in Canada. Contact us for a free consultation regarding your GST/HST situation:

UHY Victor LLP Canada US Tax Team

crossbordertax@uhyvictor.com
(514) 282-0067

 


 

Additional Resources

Disclaimer: UHY Victor assumes no responsibility or liability for any errors or omissions of this site. The information used in this site is provided for general guidance. This article is not a substitute for professional legal advice.

 

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