GST/HST Changes Effective July 1, 2021
As many of us have been confined to our homes during the pandemic for some or all of the past year, it should come as no surprise that online shopping platforms have flourished. Canadians have enjoyed the convenience and safety of shopping from their living rooms, confirmed in the Government of Canada’s Fall Economic Statement, where it was noted that retail e-commerce was up nearly 70% in the first eight months of 2020.
Given that the trend appears to be here to stay, the Government of Canada confirmed previously proposed changes in legislation in Bill C-30 to ensure GST/HST applies fairly to digital platforms and foreign businesses without putting Canadian businesses at a disadvantage. These changes described further below are set to become effective July 1, 2021.
Cross-border digital products and cross-border services
Based on the current legislation, most non-residents of Canada who sell goods or services into Canada generally do not have to register and collect GST/HST. They are often not considered to be “carrying on business in Canada.” For physical goods purchased from a non-resident vendor, this is typically not a concern. The applicable GST/HST is collected by the Canada Border Services Agency when the goods are imported into Canada. However, for supplies of digital products or services to Canadian consumers, the consumer is often required to self-assess and pay the applicable GST/HST directly to the Canada Revenue Agency.
Effective July 1, 2021, non-residents of Canada will become required to register for GST/HST under the following circumstances:
- For a non-resident vendor, if their total taxable supplies of digital products or services made to consumers in Canada exceed, or are expected to exceed, $30,000 over a 12-month period; and
- For a non-resident distribution platform operator, if their total taxable supplies of digital products or services made to consumers in Canada, including the supplies of digital products or services of non-resident vendors to consumers in Canada that the operator facilitates, exceed, or are expected to exceed, $30,000 over a 12-month period.
Goods supplied through fulfillment warehouses in Canada
As mentioned above, GST/HST is generally applied by the Canada Border Services Agency when the goods are imported into Canada. As many imported goods are then stored at fulfillment warehouses, the GST/HST is not consistently charged on the final price paid for the goods when sold to Canadians through distribution platforms and fulfillment warehouses located in Canada.
The following new rules will apply as of July 1, 2021:
- Distribution platform operators are required to register, collect, and remit the GST/HST in respect of sales of goods that are located in fulfillment warehouses in Canada when non-registered vendors make those sales through distribution platforms;
- Non-resident vendors are also required to register, collect, and remit the GST/HST in respect of sales of goods located in fulfillment warehouses in Canada when the non-resident vendors make those sales on their own; and
- Fulfillment businesses in Canada will 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 their behalf.
Platform-based short-term accommodation
Under current legislation, smaller providers of short-term accommodation are generally not required to register, collect, and remit GST/HST if annual taxable supplies are less than $30,000. Platform operators such as Airbnb and Vrbo also currently have no obligation to collect and remit GST/HST on behalf of the property owners.
Effective July 1, 2021, an accommodation platform operator that facilitates or expects to facilitate over a 12-month period more than $30,000 in taxable supplies of short-term accommodation in Canada where the underlying third-party suppliers of the accommodation are not registered for the GST/HST would be required to register for and collect and remit the GST/HST on such supplies.
For assistance with GST/HST, contact us and ask to speak to a member of our HST team.