Canada: Upcoming Changes in GST for digital products or services 2021
Digital services tax in Canada
As of July 1st 2021 when the new GST rules will be implemented in Canada, non-resident vendors and digital or distribution platform businesses may be required to register, collect and remit GST on their sales in Canada.
What will change in digital services tax for Canada?
The proposed GST rules were announced in November 2020 and they impose the obligation to Non-resident suppliers of digital products or services as well as platforms that facilitate the sale of these products or services to collect and pay GST for their sales in the Canadian territory. The same rules will apply to Non-resident suppliers of goods as well as operators of fulfillment warehouses.
Short-term accommodation provided via online platforms also will be subject to changes as we mentioned in our previous article.
Simplified or normal GST registration?
Businesses who supply their services in Canada and exceed CA$ 30.000 over a 12 month period have to register for GST/HST in Canada, collect and remit taxes for those services. The threshold for marketplace owners is again set at CA$ 30.000
In order to register for GST/HST in Canada the government would put in place a simplified registration system for GST but this system would not allow registrants to claim input tax credits for taxes paid on the inputs used in their commercial activities. If non-resident vendors require such a service then they can still register under the normal GST/HST rules. This would allow them to claim ITCs.
Digital services GST tax already in place in British Columbia, Quebec and Saskatchewan.
Some of the proposed GST/HST amendments echo measures already implemented by the Government of Québec for Québec Sales Tax (QST) purposes. On December 21, 2020,2 the Québec Ministry of Finance announced that it would analyze the new GST/HST proposals and harmonization decisions would be announced at a later date.
At the same time provinces, British Columbia and Saskatchewan already have a digital services tax or PST (provincial sales tax) in place. Each province has a different threshold as well as rates, so we will have to wait and see any future harmonization plans by these provinces as well.
Be prepared for the upcoming changes in digital services taxation.
The new rules outlined above would generally apply to supplies made on or after July 1, 2021, and supplies made before July 1, 2021 if all the consideration is payable on or after July 1, 2021. Therefore, businesses should begin to review their activities in Canada to determine if they would be required to register and/or to collect and remit the GST/HST on sales of digital products, services or goods in Canada.
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