Next month, there will be some notable updates made to the GST/HST requirements for non-resident vendors. It was announced that the Government of Canada will be implementing new tax measures that will focus primarily on the “digital economy”, as stipulated in the Government of Canada’s Fall Economic Statement.
As a refresher, a non-resident importer is defined as:
“[…] A business located outside of Canada that ships goods to customers in Canada and assumes responsibility for customs clearance and other import-related requirements. This program allows the exporter to include all shipping, customs clearances, duties and taxes in the shipping and handling fees charged to the customer, who could even be charged in Canadian dollars. In this way, the transaction appears to the Canadian consumer as a domestic transaction.”
The benefits of the non-resident importer program, includes, but is certainly not limited to:
- Certainty in the fees, pricing, and other payable amounts to be paid by the importer.
- Streamlines the overall trade process.
- Increases the NRI’s competitive advantage over others.
- Improve control over the shipment process.
- Expands the NRI’s general market reach.
What new GST/HST measures were proposed?
There are 3 main subjects to which these new measures are related to…
- The movement of digital products in a cross-border manner
- Shipment of goods that are supplied through fulfillment warehouses within the jurisdiction of Canada
- Short-term accommodation that is primarily platform-based.
A platform, as defined on the Government of Canada website, is:
“[…] A digital platform would be a 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.” For further information on this definition, click here.
Why is the Government of Canada proposing these changes?
As it stands today, the current GST/HST regulations result in taxes not being required for online purchases from non-resident vendors or purchases made through digital platforms. As such, these new measures would result in GST/HST being required upon purchase for these types of transactions, specifically for Canadian consumption.
“To improve the collection of the GST/HST and level the playing field between resident and non-resident vendors, the Government proposes that non-resident vendors supplying digital products or services (including traditional services) to consumers in Canada be required to register for the GST/HST and to collect and remit the tax to the CRA on their taxable supplies to Canadian consumers.”
When will these proposed measures take place?
As of July 1, 2021, these measures will be applied to the affected goods mentioned above. In addition, the measure related to warehouse fulfillment would apply to the affected supplies on or post-July 1.
Supplementary information on these measures can be found within Annex 4 of the Fall Economic Statement, under tax measures.
Are there any exceptions of note?
There are a few examples that are provided in order to understanding the cases in which exceptions are valid to the new GST/HST rules:
- Supply to different provinces/territories: If a non-resident supplier provides security monitoring service for a cottage or condo in Ontario, to a consumer whose place of residence is in Alberta, the non-resident should collect the Ontario HST rate.
- Non-resident vendors or distribution platform operators shouldn’t collect GST/HST on digital products or services purchased by someone whose usual place of residence is in Canada — if the supply is linked or restricted to a location outside of Canada! Such as real estate outside of Canada, etc.
If you are unsure whether these new measures will impact your current operations, it is ideal that you connect with a customs broker that can help you navigate these adaptive situations. Click here to connect with a broker!