Canada releases FAQ for the application of new measures related to Digital Services and other electronic commerce supplies

The Canadian government is about to introduce new measures that affect electronic commerce supplies aiming to level the field between local and foreign digital providers of Digital Services. As of 1 July 2021, three proposed new measures will come into force, affecting foreign Digital Services and Products Providers, Goods supplied through fulfillment warehouses in Canada, and Short-term accommodation platforms.

To shed some light on the incoming changes, the Canadian Tax Authority has released a FAQ, including important clarification to some terms meaning and how businesses and customers would be affected.

The main take outs are:

General information:

What does ‘platforms’ mean?

Digital platforms: website, an electronic portal, gateway, store or distribution platform, or any other similar electronic interface, but would exclude an electronic interface that solely processes payments.

Distribution platform: a digital platform through which a person facilitates the sales of property or services of third-party vendors, such as goods or mobile apps (also sometimes referred to as an online marketplace).

Accommodation platform: a digital platform through which a person facilitates the making of supplies of short-term accommodation.

Distribution or Accommodation platform Operator (concerning supplies made through the platform): person (other than the supplier) that either controls or sets the essential elements of the transaction between the supplier and the customer.

For Businesses:

Which businesses will be affected:

– by the cross-border digital products or services measures?

The new measures will affect non-resident vendors supplying digital products or services (such as online subscription-based video or music streaming, including even legal and accounting services) and Distribution platforms facilitating supplies of digital products or services (like mobile apps) made by non-resident vendors to consumers in Canada.

– by the measure related to goods supplied through fulfillment warehouses in Canada?

Distribution platform operators would be required to register, collect and remit taxes on sales of goods located in fulfillment warehouses in Canada (or shipped from a place in Canada to a purchaser in Canada) when those sales are made by non-registered vendors through distribution platforms.

Non-resident vendors selling goods located in fulfillment warehouses in Canada (or shipped from a place in Canada to a purchaser in Canada) would be required to register, collect and remit taxes on sales made on their own (i.e.: own website instead of distribution platform).

– by the measure relating to platform-based short-term accommodation?

GST/HST would apply to all supplies of short-term accommodation in Canada facilitated through accommodation platforms. Besides, the requirement to collect and remit GST/HST would be on either the property owner or the accommodation platform operator.

Simplified GST/HST Registration and Remittance framework

Non-resident vendors and non-resident distribution platform operators that are required to register and collect the GST/HST under this proposed measure will have at their disposal a simplified registration and remittance process.

The registration threshold will not change, therefore all non-resident vendors will be required to register for GST/HST when they exceed or expect to exceed CAD 30,000 over a 12-month period.

In addition, non-resident accommodation platforms will also be able to use a simplified registration and remittance system.

For Consumers:

Final consumers in Canada will see prices increasing in all products and services provided by affected businesses and activities impacted by the new measures.

Global VAT Compliance has been following these changes and is ready to help you register in Canada so your business complies with the new regulations.