Non-resident businesses located outside of Canada face new GST/HST rules effective July 1, 2021. To prepare for these rules, affected non-resident businesses that sell products or services to Canadian customers but do not carry on business in Canada should review their upcoming GST/HST obligations. These obligations depend on each businesses' specific circumstances, including whether:
- They make taxable supplies of intangible personal property (IPP), services or qualifying tangible personal property (goods)
- Their taxable supplies are facilitated through platform operators who are deemed to be making these taxable supplies
- They are currently registered under the normal GST/HST registration rules
- They are required to be registered under the new GST/HST rules, and if so, whether they must register under the current normal GST/HST registration rules or the new simplified GST/HST registration system.
Affected businesses must carefully review the new GST/HST rules to determine how they apply, and adjust their systems accordingly. In addition, non-resident businesses should be prepared to respond to requests for information from platform operators who are also preparing for these new GST/HST rules. Similar rules apply for QST purposes.
Canada proposed GST/HST changes in its 2020 Fall Economic Update that will require some non-resident businesses, and many Canadian and foreign platform operators, to register and collect GST/HST on certain sales of IPP, services and qualifying goods they make themselves or that are facilitated through electronic platforms. Essentially, the new GST/HST rules include a set of rules for IPP and services, and another set of rules for qualifying goods. There are also additional specific rules for supplies of short-term accommodation. To determine which GST/HST rules apply, non-resident businesses and platform operators must clearly identify certain details of each transaction (e.g., the nature of the supply, the customer, the location of the good).
While most platform operators that carry on business in Canada (Canadian platform operators) are registered for GST/HST purposes, they generally collect GST/HST only on their own taxable supplies. However, starting July 1, 2021, many Canadian platform operators will have to collect and remit GST/HST on sales facilitated through their platforms that certain sellers make to their customers, under these new rules. These platform operators' GST/HST collection obligations depend on whether:
- The taxable sales made through their platforms are supplies of IPP and services or supplies of qualifying goods, and
- The sellers of these taxable supplies are registered for GST/HST purposes and, if so, whether they are registered under the normal GST/HST registration system, or the new GST/HST simplified registration system.
Similar changes are expected to the QST rules effective July 1, 2021.
For details on how the new GST/HST rules apply to platform operators, see TaxNewsFlash-Canada 2021-07, "Platform Operators — Get Ready for GST/HST Changes on July 1, 2021".
Taxable supplies of IPP and services
In general, certain non-resident businesses that are not currently registered for GST/HST are required to register under the new GST/HST simplified registration rules and start collecting GST/HST effective July 1, 2021. This requirement applies to non-resident businesses who make taxable supplies of IPP and services to non-registered Canadian customers totaling more than $30,000 of supply over a rolling 12-month period. Note that this threshold may not include sales of IPP and services facilitated through certain electronic platforms, and that platform operators may be required to include these sales in their own $30,000 registration threshold calculations.
Non-resident businesses that sell IPP and services exclusively through an electronic platform, and are not currently registered for GST/HST purposes, will generally not be required to register under the new GST/HST rules. These businesses are generally not required to register because they will not meet the $30,000 registration threshold. Some exceptions apply. Instead, the electronic platform operators will be required to include these sales in their registration threshold to determine whether they must collect and remit GST/HST. However, non-resident businesses that make such sales on their own and through electronic platforms may exceed the $30,000 registration threshold and may be required to register and collect GST/HST effective July 1, 2021.
Non-resident businesses that sell IPP and services and are required to register under the new GST/HST rules will have to register under the new simplified registration system, unless they qualify to register under the normal rules and choose this method instead. Non-resident businesses that decide to register under these normal registration rules must collect and remit GST/HST on all their taxable sales, including sales through the platform, since the electronic platform is no longer deemed to be making these sales. Non-resident businesses may decide to register under the normal GST/HST registration rules for various reasons (e.g., to claim input tax credits for GST/HST paid on its costs).
Non-resident businesses and platform operators will have to determine whether they are required to collect GST or HST on these taxable supplies. To make this determination, these businesses and platform operators should consult special place-of-supply rules under the new simplified GST/HST registration system. Businesses and platform operators registered under the normal GST/HST registration rules must apply the regular place-of-supply rules. Similar rules are expected for QST purposes.
Taxable supplies of goods
Certain non-resident businesses that sell qualifying goods directly to customers in Canada may also have to register under the normal GST/HST registration rules and start collecting GST/HST on all their taxable sales effective July 1, 2021. This requirement applies to non-resident businesses that:
- Do not carry on business in Canada and are not registered for GST/HST under the normal registration rules, and
- Sell qualifying goods from their own website or platform in excess of the $30,000 registration threshold.
Note that non-resident businesses that supply goods are not eligible for the new simplified GST/HST registration system.
Non-resident businesses that sell qualifying goods through qualifying platforms must carefully calculate their $30,000 threshold. As with supplies of IPP and services, the rules deem platform operators to make certain supplies of qualifying goods, where those supplies are facilitated through their platforms by non-resident businesses that are not registered under the normal rules. In general, a "qualifying good" means a taxable supply of tangible property that is delivered or made available in Canada to a customer. However, a qualifying good excludes a zero-rated good or a good that is sent by mail or courier from outside Canada to a recipient in Canada by the supplier (or on behalf of the supplier).
Non-resident businesses that are registered under the normal GST/HST registration rules must collect GST/HST on all their goods sold to Canadian customers (including taxable supplies of IPP and services), regardless of whether the customers are registered for GST/HST.
Businesses and platforms operators must also determine the appropriate GST/HST place-of-supply rules of those goods so they can determine whether to collect GST or HST starting July 1, 2021. Similar rules are expected for QST but with certain provincial changes.
We can help
Your KPMG advisor can help you assess the effect of these new GST/HST and QST rules on your business and provide guidance on how this development might affect you in the future. For more details, contact your KPMG advisor.
Information is current to June 7, 2021. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500