Many brick & mortar businesses in Canada have suffered a lot due to the COVID pandemic last year. On the other hand, digital sales have skyrocketed due to the lockdown and the government is concerned that the existing GST/HST rules put Canadian businesses at a disadvantage compared to foreign e-commerce businesses. The proposed GST/HST rules will apply to a foreign business selling to Canadian consumers that includes the following:
- Cross-border digital products and services
- Goods supplied through Canadian fulfillment warehouses
- Short-term accommodation through digital platforms
Cross-Border Digital Products and Services
Foreign suppliers of digital goods and services don’t collect GST/HST as they don’t have any physical presence in Canada. Whereas, Canadian suppliers collect HST on their products which makes their products and services more expensive and less competitive. It is proposed that foreign-based online businesses having no physical presence in Canada must register for the HST program account upon exceeding the $30,000 registration threshold. Under the proposed HST rules, these non-resident vendors would require to collect GST/HST on sales to Canadian customers. They will have to set up processes to collect GST/HST.
Goods Supplied Through Canadian Warehouses
When the foreign online businesses sell goods to Canadians without having any physical presence in Canada and using Canadian warehouses, they will be required to collect GST/HST. The proposed rules would require such vendors and digital platform operators (with sales over $30,000 over a period of 12-months) to register for GST/HST under the normal regime and collect and remit GST/HST on sales to Canadians of goods located in Canadian fulfillment warehouses. Fulfillment warehouses must notify the CRA that they are carrying on as a fulfillment business. They must also maintain records about their non-resident clients and the goods stored on their behalf.
Short-term Accommodation Through Digital Platforms
Many property owners use digital platforms to rent their residence or other properties, but they don’t charge GST/HST because either they’re unaware of the rules or their rentals are below the $30,000 registration threshold. This poses fairness concerns for hotels and other traditional accommodation providers, which are compounded by the lack of GST/HST collection obligations on the digital platforms that facilitate these rentals.To help the CRA in administering these rules, accommodation platform operators would be required to maintain records and file an information return with the CRA for each calendar year by six months after the end of the calendar year.Non-residents around the world and their advisors will need clear and comprehensive guidance to ensure compliance. Although the CRA has not yet issued any notification on how the proposed rules will work, foreign online vendors will need to be ready to face proposed rules for the GST/HST.If you're feeling confused regarding the new proposed changes, GTA Accounting can help with your GST/HST Filings no matter where you live in Canada. Contact us for a free consultation.