Canada: GST to be charged on digital goods and services from July 2021

28 May 2021

From 1 July 2021, the Canadian Revenue Agency (CRA) will introduce Goods and Sales Tax (GST)/Harmonised Sales Tax (HST) on sales of e-commerce goods and service transactions (including short-term accommodation sold online) made by non-resident companies to consumers.

Currently, non-resident businesses providing e-commerce goods and services to Canada do not generally have to charge GST/HST on their sales to consumers. However, to remove the unfair advantage this gives to non-resident companies over Canadian resident providers, the Canadian government will introduce GST at 5% and HST usually at 5% (dependant on the Canadian province), on these types of transactions. However, this new tax will not apply to business to business sales.

These rule changes mean that GST/HST will now apply to:

• Sales of digital products and services by non-resident vendors.
• Goods supplied through fulfilment warehouses located in Canada by non-resident vendors.
• Short-term accommodation sold through online platforms

This new tax will only apply to non-resident businesses with sales in Canada above a threshold of C$30,000 (approx. £18,000) in a 12 month period, and to remove some of the administrative burden this new tax puts on these types of businesses, the CRA will introduce a simplified registration and VAT remittance system for these types of supplies specifically.

For sales made through digital distribution platforms or Online Market Places, the responsibility to register, collect, and remit the GST/HST would fall on the digital platform operator themselves regardless of whether they fulfil the product or not.