Canadian Non-residents indirect taxes registration requirements
The Goods and Services Tax/Harmonized Sales Tax (“GST/HST”) system is a value-added tax regime that applies across Canada. The GST/HST framework is designed to ensure that the tax is levied at each stage of production and distribution but is ultimately borne by the end consumer.
Under Canadian tax law, non-resident businesses making taxable supplies in Canada may be required to register for and collect GST/HST. This requirement ensures that foreign entities engaging in commercial activities within Canada are subject to the same tax obligations as resident businesses, thereby maintaining a level playing field and ensuring that tax revenues are appropriately collected.
The rise of e-commerce has necessitated additional and extended rules specific to online transactions. These rules address the unique challenges posed by digital marketplaces, where the traditional concepts of physical presence and supply chain management do not neatly apply.
This paper aims to provide a comprehensive overview of the GST/HST registration requirements for non-resident businesses. It will explore the general principles governing non-resident registration, delve into the specific provisions applicable to e-commerce, and offer practical considerations for the reader.
The focus of this paper is on the application of the GST/HST. Unless otherwise indicated, any reference to a provision refers to the Excise Tax Act (R.S.C., 1985, c. E-15) (“ETA”).
1. OVERVIEW OF INDIRECT TAXES IN CANADA
In Canada, indirect taxes apply at 2 levels: federal and provincial. GST/HST applies federally to all goods and services unless specifically exempt or zero-rated under the legislation. The GST rate is 5%. Certain provinces have combined their provincial sales taxes with the GST to create a Harmonized Sales Tax (“HST”). The HST rate is 13% in Ontario, and 15% in the Atlantic provinces (New Brunswick, Prince Edward Island, Nova Scotia and Newfoundland and Labrador).
Four Canadian provinces have their own separate sales taxes regime as follows: Québec Sales Tax at 9.975%, Provincial Sales Tax in British Columbia at 7%, in Saskatchewan at 6% and in Manitoba at 7%.
| Province/Territory | Type | GST/HST (%) | PST/QST (%) | Total tax rate (%) |
| Alberta | GST | 5 | N/A | 5 |
| British Columbia | GST + PST | 5 | 7 | 12 |
| Manitoba | GST + PST | 5 | 7 | 12 |
| New Brunswick | HST | 15 | N/A | 15 |
| Newfoundland and Labrador | HST | 15 | N/A | 15 |
| Northwest Territories | GST | 5 | N/A | 5 |
| Nova Scotia | HST | 15 | N/A | 15 |
| Nunavut | GST | 5 | N/A | 5 |
| Ontario | HST | 13 | N/A | 13 |
| Prince Edward Island | HST | 15 | N/A | 15 |
| Quebec | GST + QST | 5 | 9.975 | 14.975 |
| Saskatchewan | GST + PST | 5 | 6 | 11 |
| Yukon | GST | 5 | N/A | 5 |
Applicable rates as of January 1, 2024.
GST/HST is a multistage, value-added tax which applies at each stage of the production and distribution chain. The GST/HST system allows registrants to claim Input Tax Credits (“ITCs”) i.e. a tax refund, if the related output constitutes a commercial activity (with the exclusion of exempt supplies).
A taxable supply is a supply “that is made in the course of a commercial activity”.[1] Commercial activities mean any business or adventure or concern in the nature of trade carried on by a person, apart from exempt activities.[2] As such, all supplies are generally taxable unless they are specifically exempt under Schedule V of the ETA.
A “supply” includes “the provision of property or a service in any manner, including sale, transfer, barter, exchange, license, rental, lease, gift, disposition, etc”.[3]
A key element to consider whether a non-resident person needs to register for and collect GST/HST is whether they have made a taxable supply in Canada. Different rules apply depending on the type of supply provided. This determination can sometimes be straightforward and evident, or quite complex.
The following table summarizes the place of supply rules, indicating if a supply is deemed to be made in Canada or outside Canada.
| Place of supply in Canada or outside Canada | ||
| Type of supply | Deemed made in Canada 142(1) ETA | Deemed made outside of Canada 142(2) ETA |
| Supply of Tangible Personal Property (“TPP”) by way of sale | TPP delivered or made available in Canada to the recipient. | TPP delivered or made available outside of Canada to the recipient. |
| Supply of TPP otherwise than by way of sale | Possession or use of the TPP given or made available in Canada to the recipient. | Possession or use of the TPP given or made available outside Canada. |
| Supply of Intangible Personal Property (“IPP”) | IPP may be used in whole or in part in Canada IPP relates to RP situated in Canada, to TPP ordinarily situated in Canada or to a service to be performed in Canada. | IPP may not be used in Canada. IPP relates to RP situated outside Canada, to TPP ordinarily situated outside Canada or to a service to be performed wholly outside Canada. |
| Supply of Real Property (“RP”) or service in relation to RP | RP situated in Canada | RP situated outside Canada |
| Supply of services | Service is, or is to be, performed in whole or in part in Canada. | Service is, or is to be, performed wholly outside Canada |
Once it is established that a supply is made in Canada, a supplier of a taxable supply must also determine the province in which the supply was made and the applicable GST/HST rate.
The rules for such a determination can be complex and are not covered in this paper.
2. GST/HST REGISTRATION REQUIREMENT – REGULAR REGIME
Subsection 240(1) of the ETA provides that every person who makes a taxable supply in Canada in the course of a commercial activity is required to be registered except, notably, if:
- the person is a non-resident person who does not carry on business in Canada (subject to certain exceptions).
- Subsection 143(1) of the ETA deems that a supply of personal property or service made in Canada by a non-resident person is made outside Canada unlessthe supply is made in the course of a business carried on in Canada.
2. the person is a small supplier.
- A person is considered as a small supplier if the total revenue (before expenses) from all their worldwide taxable supplies, including those of their associates, is $30,000 or less in any single calendar quarter and in the last four consecutive calendar quarters. [4] A person ceases to be a small supplier in a calendar quarter if the total consideration due or paid in that quarter exceeds $30,000. This status change occurs immediately before the payment or due date of the taxable supply that exceeds the $30,000 threshold.
- For the sake of calculation of the total revenue, revenues from supplies of financial services, sales of capital property, and goodwill from the sale of a business are not taken into consideration.
2.1. “Non-Resident” for GST/HST Purposes
The residence status of a person (an individual, a partnership, a corporation, a trust, etc.) is crucial for various provisions of the ETA. This paper focuses on the GST/HST registration requirements for non-residents.
Subsection 123(1) of the ETA defines a “non-resident” as someone who is not resident in Canada, determined according to general legal principles.
- An individual will be considered resident of Canada based on all facts and circumstances, including the individual’s intention, his residential ties, and the regularity and length of visits to Canada.
- A corporation that is not incorporated in Canada may be considered a resident of Canada, if the central management and control of the activities of the corporation are exercised in Canada. The central management and control issue is a question of fact and is the determining factor in deciding the resident status of a corporation.
- In the case of a Trust, the residence status will generally be determined by reference to the residence of the majority of the trustees.[5]
However, section 132 of the ETA may, in certain situations, deem a person who would otherwise be a non-resident to be a resident of Canada.
According to subsection 132(1) of the ETA, the following persons are deemed to be resident of Canada for GST/HST purpose:
- in the case of a corporation, if the corporation is incorporated or continued in Canada and not continued elsewhere;
- in the case of a partnership, an unincorporated society, a club, an association or an organization, or a branch thereof, if the member, or a majority of the members, having management and control thereof is or are resident in Canada at that time;
- in the case of a labour union, if it is carrying on activities as such in Canada and has a local union or branch in Canada at that time; or
- in the case of an individual, if the individual is deemed under any of paragraphs 250(1)(b) to (f) of the Income Tax Act (RSC , 1985, c. 1 (5th Supp.)) to be resident in Canada at that time.
2.1.3. Permanent Establishment
A non-resident person who has a permanent establishment (“PE”)[6] in Canada is considered to be resident in Canada in respect of their activities carried on through this PE.[7] In such a case, the special rules applicable to supplies made by a non-resident deeming a supply to be made outside Canada will not apply, and the person will need to register for and charge GST/HST on their taxable supplies made in Canada unless they are a small supplier. [8] By contrast, in the case of a resident of Canada who has a PE in a country other than Canada, the person is deemed to be a non-resident person in respect of their activities carried on through that PE.[9]
Determining whether a person has a PE in Canada requires an evaluation of all relevant facts. The ETA defines a PE as:
“(a) a fixed place of business of the particular person, including (i) a place of management, a branch, an office, a factory or a workshop, and (ii) a mine, an oil or gas well, a quarry, timberland or any other place of extraction of natural resources, through which the particular person makes supplies, or (b) a fixed place of business of another person (other than a broker, general commission agent or other independent agent acting in the ordinary course of business) who is acting in Canada on behalf of the particular person and through whom the particular person makes supplies in the ordinary course of business;”[10]
We define these key concepts below.
2.1.3.1. “Fixed place”
Merely having a presence in Canada may not automatically create a PE. The “fixed place” must provide space at the disposal of the person who has a certain degree of continuity and permanency, as well as some control over the place of business. The permanent presence of an employee or representative is also an indicator of a fixed place of business.
2.1.3.2. “Through which (or through whom) the particular person makes supplies”
The degree to which supplies are being made through the fixed place must also be sufficient to consider it a PE. Typically, the existence of any of these factors is sufficient to suggest that goods or services are being supply through the fixed place of business:
- there is authority at the fixed place of business to enter into contracts or accept purchase orders for the provision of supplies to other persons and that authority is regularly exercised.
- the tangible personal property that is being supplied is physically manufactured or produced at the fixed place of business.
- if the supply is a service, the service is performed at the fixed place of business; or
- the service of maintaining equipment supplied by the non-resident person, is performed at the fixed place of business (e.g., an authorized factory repair outlet).
The presence of a combination of the following factors alongside any of the primary factors would indicate that supplies are being provided from a fixed place of business:
- soliciting orders.
- taking (receiving) customer orders.
- arranging for customer contracts.
- providing for the storage, packing, shipping, and/or transportation of goods.
- providing general administration of accounts, including collection and depositing payments.
- providing advertising for the supply, and
- providing for customer follow-up and after-sales support.
It should be noted that an employee working from their home office can also be considered a PE even if there is no other physical location in Canada. That would be the case if an employee can receive orders that they forward to their head office outside Canada for final approval, and where the employee’s recommendations are usually accepted (i.e., the employee has “de facto” authority to contract on behalf of the non-resident).
2.1.3.3. “Fixed place of business of another person”
In the case of a fixed place of business of another person, the person must be a “dependent agent” as opposed to an “independent agent”. A dependent agent is typically subject to detailed instructions or broad control by the principal, may not have autonomy in carrying out tasks and is closely directed by the principal on how to execute their responsibilities. The dependent agent is less likely to bear financial risks associated with the business activities they undertake on behalf of the principal. The agent may have limited or no involvement as an agent for other persons, indicating a more exclusive relationship with the principal. This contrasts with an independent agent who may have multiple principals or clients, demonstrating greater autonomy and diversity in their business relationships.
For more details on what constitutes a PE, see the GST/HST Policy Statement P-208R published by the Canada Revenu Agency (“CRA”).
2.2. “Carrying on a Business in Canada”
A non-resident entity carrying on business in Canada, except small suppliers, must register for GST/HST if they make taxable supplies in Canada, even if that person does not have a permanent establishmentin Canada.[11] By contrast, if a non-resident does not conduct business in Canada and is not registered for GST/HST, supplies made in Canada are considered made outside Canada, relieving it from tax collection.
The term “carrying on business in Canada” is not defined in the ETA and must be determined through a factual analysis of all pertinent details.
The CRA issued the Policy Statement P-051R2 “Operation of a Business in Canada” on April 29, 2005, which outlines factors that may be considered when determining if a non-resident person operates a business in Canada. Those factors include:
- Location of agents or employees;
- Delivery and payment location;
- Location of purchases or asset acquisition;
- Location where transactions are solicited;
- Location of assets or inventory;
- Where business contracts are concluded;
- Bank account location;
- Listing in directories;
- Branch or office location;
- Where the service is performed and
- Location of manufacture or production.
The significance of each factor varies based on the business activity and specific circumstances. It is not a matter of a numerical test; judgment is needed to assess each factor’s importance in context of the business activities of the non-resident. Generally, significant presence in Canada is necessary for the non-resident to be considered to be carrying on business in Canada. Isolated transactions as part of a foreign-based business typically do not constitute carrying on business in Canada, as the relevant factors usually are not sufficiently met.
Registration under the GST/HST regime is mandatory for non-residents not carrying on business in Canada under three specific circumstances.
2.2.1. Supplier of prescribed property
Anyone who, within Canada, directly or through an employee, agent, or targeted advertising; seeks orders for, or offers to provide, prescribed property to be sent to a Canadian address via mail or courier is deemed to be carrying on business in Canada and must register to and collect GST/HST.[12] Prescribed property” include books, newspapers, periodicals, magazines, and any similar printed publication.[13]
Any non-resident entering Canada to provide taxable admissions for a place of amusement, seminar, activity, or event held within the country, must register for GST/HST before engaging in such transactions, and a supply of such property is deemed to be made in Canada (and is thus taxable) even if the supplier is not “carrying on a business in Canada”.[14] This applies, for example, to a non-resident performer or lecturer in the case of a concert or lecture taking place Canada. Those persons are also ineligible for small supplier status.[15]
2.2.3. Supplier of qualifying tangible personal property supply
This specific exception will be discussed later in this paper in the section 3.2.
2.3. Summary – Traditional Registration rules for Non-Resident
When a non-resident of Canada supplies property or services to Canadian recipients or in the territory of Canada, it should consider if the supply is subject to GST/HST, and if it is required to register and collect taxes.
(1) It needs to be established that a supply is made in Canada, since taxable supplies made outside Canada do not fall under the GST/HST jurisdiction.
(2) It needs to be established whether a taxable supply is made through a PE of the non-resident. If it’s the case, the supply is deemed to be made by a resident of Canada, and the supplier must register if he is not a small supplier.
(3) It needs to be established whether the supplier is carrying on business in Canada. If it’s the case, the supplier must register if he is not a small supplier.
- If the non-resident seeks orders for, or offers to provide books, newspapers, periodicals, magazines, and any similar printed publication (“prescribed property”) to be sent to a Canadian address via mail or courier, the non-resident is deemed to be carrying on a business in Canada and must register if he does not qualify as a small supplier.
(4) If the supply is one of admissions in Canada for a place of amusement, seminar, activity, or event held within the country, the non-resident is required to register and collect taxes on the supply even if he would qualify as a small supplier, and even if he is not carrying on a business in Canada.
As discussed above, non-resident not carrying on a business in Canada are generally not required to register and collect GST/HST. Additionally, a supply made by an unregistered non-resident person who does not carry on any business in Canada is generally deemed to be made outside Canada.[16]
Effective July 1st, 2021, new rules for digital economy businesses apply for certain non-residents, especially for non-resident businesses that supply property or services to Canadians that are not registered to GST/HST (generally, B2C transactions).
3. EXTENDED E-COMMERCE RULES AND SIMPLIFIED REGIME
While the traditional registration rules for non-residents primarily focus on whether the non-resident is carrying on business in Canada to determine the need for GST/HST registration, the landscape changed significantly with the implementation of new e-commerce rules, particularly impacting non-residents supplying digital products or services to Canadian consumers.
With the implementation of the new e-commerce rules, a simplified GST/HST regime has also been established, catering to specific non-residents who either make supplies of services or IPP or facilitate the making of supplies of services or IPP to unregistered Canadians.
Specifically, we will discuss in this section:
- Specified supplies of services or IPP, targeting supply of services or IPP to Canadian consumers (for example, streaming services or online video game provider).
- The qualifying tangible personal property supplies, being the supply of TPP by a non-registered non-resident when the TPP is shipped from a Canadian warehouse to another destination in Canada (i.e. non-resident suppliers that have an inventory of goods located in Canada to be supplied in Canada).
- Distribution platform operators that facilitate qualifying tangible personal property supplies or specified supplies (for example, platforms like Amazon, the Apple Store, etc.).
- Accomodation platform operators that facilitate supplies of short-term accommodation in Canada (e.g., AirBNB or booking.com)
3.1. Specified Supply of Services or Intangibles
A specified supply means a supply of services or intangible personal property (“IPP”) that may be used or consumed in Canada or that relates to property situated in Canada.[17] That could include online subscription-based video or music streaming, mobile apps, e-books, online video gaming as well as traditional services such as legal and accounting services.
A Specified non-resident supplier (person that does not “carry on business in Canada” and that is not registered for GST/HST)[18] who makes specified supplies to specified Canadian residents (recipients having their usual place of residence in Canada and that are not registered for GST/HST) if it exceeds the threshold amount of $30,000 for any period of 12 months.[19]
3.2. Qualifying Tangible Personal Property (“QTTP”)
Specific registration requirements also apply tonon-resident suppliers who do not carry on business in Canada and makes qualifying tangible personal property supplies (“QTPP supplies”) to specified recipients (i.e. recipients of the supply that are not registered for GST/HST, other than a non-resident person that is not a consumer of the supply).[20] These suppliers are now required to register under the regular GST/HST regime[21] when the QTPP supplies exceed $30,000 for any period of 12 months.[22]
A QTPP supply generally refers to a supply of TPP shipped from a Canadian warehouse, or another location within Canada, to a destination also within Canada.[23] The non-resident supplier must collect and remit taxes on its supplies made to a specified recipient.
3.3. Distribution Platform Operators (“DPO”)
Digital platforms (other than an excluded operator) that facilitate QTPP supplies to specified recipients or specified supply to specified Canadian resident through their platform must also register to GST/HST when those respective supplies exceed $30,000 for any period of 12 months.[24]
A digital platform includes a website, an electronic portal, gateway, store or distribution platform or any other similar electronic interface but does not include an electronic interface that solely processes payments.[25] The digital platform must also control or set the essential elements of the transaction or be involved in collecting, receiving, or charging the consideration for the transaction and transmitting payment to the supplier.[26]
An excluded operator, which is excluded from this specific registration requirement, is a person:
- that does not set, directly or indirectly, any of the terms and conditions under which the supply is made, is not involved, directly or indirectly, in authorizing the payment of the consideration for the supply; and is not involved in the ordering or delivery of the property or service; or
- that solely provides for the listing or advertising of the property or service or is solely a payment processor.[27]
It is also important to note that digital platforms that facilitate specified supplies through their platform must register for the simplified GST/HST regime, while digital platforms that facilitate QTPP supplies must register for the regular GST/HST regime according to subsection 240(1.5) of the ETA.
3.3.1. Accommodation Platform Operators (“APO”)
A Digital Platform (other than an excluded operator) that facilitates short-term accommodation in Canada (e.g., AirBNB or booking.com) by persons who are not registered for GST/HST must also register for the simplified GST/HST regime.
The obligation to register arises when those supplies of short-term accommodation exceed $30,000 for any 12month period (provided that the digital platform controls or sets the essential elements of the transaction or is involved in collecting, receiving, or charging the consideration for the transaction and transmitting payment to the supplier).[28]
When a registered digital platform facilitates a QTPP supply, a specified supply, or a supply of short-term accommodation in Canada, the supply is deemed, for GST/HST purposes, to be made by the digital platform, rather than the actual non-registered supplier.[29] Consequently, the digital platform is responsible for collecting and remitting GST/HST on those supplies. Furthermore, the digital platform is considered not to have made a supply of services to the supplier and is therefore not required to charge GST/HST on its fees.[30]
However, in cases where a registered digital platform facilitates a specified supply or a supply of short-term accommodation in Canada by a person who is registered for the regular GST/HST regime, this presumption does not apply. In such instances, the real supplier is accountable for collecting, reporting, and remitting the tax.
3.4. GST/HST E-Commerce Rules Threshold Calculation
| Type of entity subject to the extended E-Commerce rules | Amount to consider for the calculation of the $30,000 threshold |
| Specified non-resident supplier (making specify supplies of service of IPP) | Specified supplies to specified Canadian residents (also applies to traditional services) other than a zero-rated supplies. Excluding: supplies that are facilitated by a DPO that is registered for the GST/HST. Registration to simplified GST/HST regime or regular GST/HST regime. |
| Supplier of QTPP supplies | QTPP supplies made to specified recipients. Excluding: supplies that are facilitated by a DPO that is registered for the GST/HST. Registration to regular GST/HST regime. |
| DPO facilitating specify supplies | Specified supplies to specified Canadian residents by specified non-resident suppliers made through their platform, other than a zero-rated supplies. Registration to simplified GST/HST regime or regular GST/HST regime. |
| DPO facilitating QTPP Supplies | QTTP supplies to specified Canadian residents made through their platform. Registration to regular GST/HST regime. |
| APO facilitating supplies of short-term accommodation in Canada | Short-term accommodation supplies in Canada and Canadian accommodation related supplies.[31] Registration to simplified GST/HST regime or regular GST/HST regime. |
The extended E-commerce rules requiring certain non-resident entity to register are only applicable when the $30,000 threshold amount is reached over a 12-month period. See in the table below the supplies that need to be considered in the calculation of the $30,000 threshold for each type of entity subject to the extended E-Commerce rules. When those supplies reach or are expected to reach $30,000 over a 12-month period, the entity is required to register.
3.5. Methodology to Determine Usual Place of Residence
To determine whether a specified supply of service or IPP is made to a specified Canadian resident, the supplier must establish that the recipient has his usual place of residence in Canada.[32] The following indicators need to be considered in order to establish the usual place of residence[33]:
- the home address of the recipient;
- the business address of the recipient;
- the billing address of the recipient;
- the Internet Protocol address of the device used by the recipient or similar data obtained through a geolocation method;
- payment-related information in respect of the recipient or other information used by the payment system;
- the information from a subscriber identity module, or other similar module, used by the recipient;
- the place at which a landline communication service is supplied to the recipient; and
- any other relevant information that the CRA may specify.
The usual place of residence of a recipient will be considered being in Canada if[34] :
- the supplier has obtained two or more Canadian indicators in respect of the recipient and has not obtained more than one foreign indicator in respect of the recipient;
- the supplier has obtained two or more Canadian indicators in respect of the recipient and two or more foreign indicators in respect of the recipient, but the Canadian indicators are reasonably considered to be more reliable in determining a place of residence (for example, the credit card billing information could be more reliable than the sim card information); or
- If the two methods above do not resolve the issue, then the supplier can use “any method that the CRA may allow” to determine the usual place of residence.
3.6. Registration Status of a Recipient
It is essential for non-residents to collect, obtain and maintain evidence “satisfactory to the Minister” (i.e., the Canadian Revenue Agency) that their customer is validly registered under the normal GST/HST regime (and not the “Simplified” GST/HST Regime).
This indicates that the supplier is not required to collect GST/HST under the simplified regime.
Note that apart from individual consumers, certain entities may not be registered if their business involves making exempt supplies, like residential landlords, medical practitioners and dentists, financial institutions and financial service providers or public sector bodies like charities, not-for-profits, schools, colleges, universities, hospitals and municipalities.
3.7. Particularities of the Simplified GST/HST Regime
The specified supplies, when made by non-resident suppliers, would normally be considered made outside Canada, but the extended e-commerce rules deem those specified supplies to be made in Canada.[35]
This regime is different from the regular GST/HST regime as the non-resident is not considered to be a GST/HST registrant,[36] and is thus not entitled to claim ITCs (i.e refund of the GST/HST paid or payable on your purchases and expenses related to your commercial activities). As ITCs are available to a “registrant”[37].
3.8. Fulfillment Warehouse Obligations
To assist the CRA in the administration of the GST/HST in respect of QTPP supplies made by non-residents through fulfillment warehouses in Canada, persons carrying on a fulfillment business in Canada are now required to notify the CRA that they are carrying on a fulfillment business and maintain certain records on their non-resident clients.[38] A person would be considered to carry on a fulfillment business if they provide services of storing goods in Canada (other than services that are incidental to a freight transportation service) that are offered for sale by non-resident persons.
4. OTHER CONSIDERATIONS SURROUNDING NON-RESIDENTS REGISTRATION
This section explores key considerations for non-residents regarding GST/HST registration in Canada.
Even if a non-resident person is not required to register under the regular GST/HST regime (e.g., if they are not carrying on a business in Canada) it may be possible to register voluntary. This can be advantageous especially if the person has expenses in Canada on which GST/HST is payable. As a registrant, he could be entitled to claim ITC on these expenses.
Voluntary registration to the regular GST/HST regime is available if the non-resident is conducting commercial activities in Canada that fall under any of the following categories:
- The non-resident regularly solicits orders for goods to be exported or delivered to Canada;
- The non-resident enters into agreements to provide services within Canada; and
- The non-resident enters into agreements to supply IPP to be used in Canada, or IPP that relate to real property located in Canada, to goods typically found in Canada or to services to be performed in Canada.[39]
Accommodation platform operators, distribution platform operators, or specified non-resident suppliers subject to registration under the simplified regime should also consider opting for registration under the regular GST/HST regime in certain cases. This allows them to ITCs.
4.1.1. GST paid on importation
When a person imports goods into Canada, the importer of record is responsible for paying 5% GST on the imported goods, calculated on the value of the goods imported plus all duties and taxes payable on importation.[40] The importer of record is usually the party responsible for ensuring that imported goods comply with all customs and legal requirements of the country of import and is identified on Canada Border Services Agency (CBSA) accounting documents.[41] The GST must be paid directly to CBSA, not to the CRA.
Non-residents registered under the regular GST/HST regime are required to provide a security deposit.[42] This requirement does not apply to non-residents registered under the simplified GST/HST regime.
The initial amount of security deposit required by the CRA is 50% of the estimated net tax for the first 12 months after registration with a minimum of $5,000 up to a maximum of $1 million.
The security deposit can be in the form of cash, certified cheque, money order, or a qualifying bond. There is an exception for businesses estimating annual sales or provision of taxable property and services in Canada of no more than $100,000, with net tax between $3,000 remittable and $3,000 refundable annually.
5. ANDERSEN’ TAKEAWAY
Any business that has significant sales in Canada should perform a Canadian sales tax assessment of their Canadian activities and should consider the following:
- Include in its contracts at least a general tax clause allowing it to charge applicable taxes. That way, if a new tax determination performed by the supplier results in a different conclusion regarding the tax treatment applicable to its supplies, the general tax clause allows the supplier to modify the way he collects tax without breaching the contract.
- Determine the position it is going to take regarding extra-territorial registration and compliance obligations – and document it.
- Determine and implement a system to consistently gather and maintain a valid GST/HST number for registered Canadian customers.
- Determine to what extent it is dealing with persons who are not registered for GST/HST.
- Consider potential adjustments to avoid registration or minimize the application of Canadian sales tax, such as changing delivery terms, implementing territorial limits, or selling through a registered platform.
- With respect to sale of goods – review the chain of transactional documents to ensure consistency in terms – particularly regarding the point of delivery.
- If required to register and intending on doing so, review its circumstances to determine whether “simplified” or “regular” registration would be most appropriate.
- Consider minimizing exposure by selling through an existing GST/HST registered entity or creating a separate legal entity for transactions with a Canadian element.
Understanding the GST/HST registration requirements for non-resident businesses is crucial for compliance with Canadian tax laws. Please note that the purpose of this paper is to offer a comprehensive overview of these rules and we recommend you consult with a tax professional for advice specific to your particular set of facts.
[1] Par. 123(1) taxable supply ETA.
[2] Par.123(1) commercial activity ETA.
[3] Par.123(1) supply ETA.
[4] 148 ETA.
[5] GST/HST memorandum 3.4, “Residence”, April 2000.
[6] For purposes of this paper, any references to PE are for sales tax purposes rather than income tax purposes.
[7] 132(2) ETA.
[8] 240(1) ETA.
[9] 132(3) ETA.
[10] 123(1) permanent establishment ETA.
[11] 240(1)(c) ETA.
[12] 143.1 ETA, 240(4) ETA, except if the person qualifies as a small supplier.
[13] 3 Publications Supplied by a Registrant (GST/HST) Regulations.
[14] 240(2) ETA, 143(1)(c) ETA.
[15] 148(3) ETA.
[16] 143(1) ETA.
[17] 211.1(1) Specified supply ETA.
[18] 211.1(1) Specified non-resident supplier ETA.
[19] 211.12(1)(a) and (2) ETA.
[20] 21.22(1) ETA.
[21] 240(1.5) ETA.
[22] 212.22(2) ETA.
[23] 211.1(1) Qualifying tangible personal property supply ETA.
[24] 211.22(2) ETA.
[25] 211.1(1) Digital platform ETA.
[26] 211.1(1) Digital platform operator ETA.
[27] 211.1(1) Excluded operator ETA.
[28] 211.12(2) ETA.
[29] 212.13(1) ETA, 212.13(3) ETA, 211.23(1)(a) ETA. The presumption applies whether the digital platform is registered under regular GST/HST regime or simplified regime – 212.13(2) ETA and 212.13(4) ETA.
[30] 211.13(1)(b), 211.13(2)(a)(ii), 211.13(3)(b), 211.13(4)(b), 211.23(1)(b) ETA.
[31] 211.1(1) ETA:Canadian accommodation related supply means a taxable supply of a service (a) that is made to a person in connection with a supply of short-term accommodation situated in Canada made to the person; and (b) the consideration for which represents a booking fee, administration fee or other similar charge.
[32] It must also establish where in Canada is the usual place of residence in order to determine the HST rate. Those rules won’t be covered in the present document.
[33] 211.11(1) ETA.
[34] 211.11(3) ETA.
[35] 211.14(1) and (2) ETA.
[36] 211.1(2) ETA.
[37] 169(1) ETA, 211.17(1) ETA.
[38] 212.24 ETA.
[39] 240(3) ETA.
[40] 212 ETA, 215 ETA. However, as per section 213 of the ETA, no tax is due for goods listed in Schedule VII, which is outside the scope of this paper.
[41] 214(1) ETA.
[42] 240(6) ETA.
