New reporting requirements for Digital Platform Operator
Reporting platform operators have an obligation to file an information return containing the required information relating to reportable sellers on or before January 31st of the year following the calendar year in which a seller is identified as a reportable seller. Such reported information also needs to be submitted to the related reportable seller on or before the same date. This means that the first reporting period, under the new Digital Platform Operator reporting rules, would pertain to the 2024 calendar year. As such, the related information returns would be due no later than January 31, 2025. However, shortly after the release and enactment of such new reporting requirements, the CRA announced that the related late filing penalties and interest would be waived until July 31, 2025.
Overview
The reporting rules for Digital Platform Operators (Part XX of the Income Tax Act[1]), which were included as part of Bill C-47 which received royal assent on June 22nd, 2023, align with the OECD’s Model Reporting Rules for Digital Platforms (“MRDP”). These rules aim to establish a standardized framework for reporting income derived through digital platforms across participating jurisdictions.
Within these jurisdictions, the partner jurisdictions[2] refer to those that have implemented the OECD’s MRDP and have agreements with Canada to exchange information.
Reporting obligations
Reporting Platform Operators are responsible for collecting and reporting information about Reportable Sellers to the Canada Revenue Agency (CRA). In turn, Reportable Sellers must provide accurate information to the platform operator to ensure compliance.
Reporting Platform Operators
This obligation applies to entities (e.g., corporations, trusts, partnerships, and foundations, but not individuals) that operate digital platforms facilitating relevant activities by sellers, which consist of:
- Sale of goods (excluding intangible or incorporeal property)
- Provision of relevant services, including:
- The rental of real or immovable property
- Personal services (a service involving time- or task-based work, unless such work is purely ancillary to the overall transaction)
- The rental of transport means (such as rideshare and delivery services)
- Any prescribed services (no particular type of services have yet to be identified by the Canadian tax authorities as prescribed for the moment).
This filing requirement applies principally to platform operators that are residents of Canada. For residents of a Partner jurisdiction, filing an information return in Canada is not required (as it will be done in their home country), but they may elect to also file in Canada. For other non-residents, the obligation applies only if they facilitate relevant activities performed by Canadian sellers or on the rental of immovable property located in Canada.
Reportable Sellers
A Reportable Seller is a person making sales of goods or relevant services through the platform, and who is either a resident of a reportable jurisdiction or has provided (or been paid/credited consideration for) relevant services related to the rental of immovable property in a reportable jurisdiction.
Certain sellers are excluded, including:
- Government entities;
- Publicly traded entities;
- Sellers with fewer than 30 relevant activities for the sale of goods, where the total consideration does not exceed $2,800 during the reporting period; and
- Sellers with more than 2,000 relevant services for the rental of real property (in respect of one property listing) during the reporting period.
Information to be reported
Reporting platform operators must report their business information and collect Reportable Sellers’ information (“reportable elements”). All reportable elements must undergo due diligence, which includes verifying the reliability of excluded sellers, the accuracy of seller-provided information, and the address of each property listing.
Reportable elements include:
- Seller’s name, date of birth (if applicable), business registration number (if applicable), primary address, and each jurisdiction where the seller is a tax resident
- Seller’s tax identification number (TIN) and the jurisdiction where the TIN was issued
- Description and number of relevant activities
- Quarterly consideration paid or credited, including any fees, commissions, or taxes withheld by the platform operator
- For rental properties: the address, land registration number (if applicable), number of days rented, and property listing type.
Filling the information return
If not already obtained, Reporting platform operators, which would be subject to this new information filing requirement under Part XX of the ITA, would, prior to filing their first information return, need to apply and obtain a business number with a corresponding RZ program account (described as a Compliance and exchange type of account).
Another key element to note is that such information returns can only be filed electronically using Internet file transfer (XML). The CRA sets specific directives for the presentation of the data, the reference identifiers, and the mode of transmission.
Penalties
Sellers should be aware that failing to provide their TIN to platform operators may result in the CRA assessing a penalty of $500 for each failure. In addition, late filing of the Part XX information return may result in penalties, for Reporting platform operators, which would range from $100 to $7,500.
For more detailed information, please visit the following CRA webpage Guidance on the Reporting Rules for Digital Platform Operators.
[1] Income Tax Act, RSC 1985, c 1 (5th Supp.)
[2] Please refer the the list of Partner jurisdictions and relevant effective date of partnership on the Canada Revenue Agency website’s link: List of Partner jurisdictions
