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CRA Update: Prepare for Canada’s sales tax changes for the digital economy

Foreign-based businesses: Prepare for Canada’s sales tax changes for the digital economy on July 1

Whether you’re an employee, employer, a corporation, or self-employed, when you pay your taxes, you’re supporting schools, hospitals, public transit, and many other services that Canadians use every day.

The mobile apps and online video streaming services that many Canadians enjoy are often sold by businesses located beyond our borders without the collection of Canada’s sales tax (known as the GST/HST). In order to level the playing field for Canadian businesses that must collect this tax, the Government of Canada has proposed a number of changes to ensure GST/HST applies in a fair and effective manner to the growing digital economy. The effective date of these proposed measures is July 1, 2021.

The Canada Revenue Agency (CRA) has launched a new web page to help affected businesses prepare to comply with their new GST/HST obligations. The CRA is sharing this information well in advance of July 1 to ensure that affected businesses have enough time to understand their obligations when the new measures come into effect. To help facilitate filing and payment, qualifying foreign currencies will be accepted.

Under the proposed measures, which were announced in the 2020 Fall Economic Statement, and again with some amendments in Budget 2021 following stakeholder consultations, businesses would generally be required to register, charge, collect and remit GST/HST on the following products and services:

• Cross-border digital products and cross-border services

Under this measure, non-resident vendors that supply digital products and other services to Canadian consumers and the online platforms that facilitate these supplies will be generally required to register and collect GST/HST on these supplies. A

• Platform-based short-term accommodation

Under this measure, the GST/HST would apply on all supplies of short-term accommodation in Canada that are facilitated through an accommodation platform.  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. Affected non-resident accommodation platform operators would be able to use a simplified GST/HST registration and remittance framework.

• Goods supplied through fulfillment warehouses in Canada

Under this measure, distribution platform operators would be required to register 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 (whether resident or not) through distribution platforms. Non-resident vendors that make sales on their own (i.e., not made through a distribution platform) would also be required to register and to collect and remit 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).

You can find the CRA’s guidance on the proposed GST/HST digital economy measures, instructions, examples, and an online questionnaire by visiting canada.ca/digital-measures.