New GST/HST Obligations on Sale of Digital Products and Services

E-Commerce in Canada by Non-Residents: New GST/HST Obligations on Sale of Digital Products and Services

As of July 1, 2021, certain non-residents of Canada providing digital products (intangibles) and services to Canadian consumers could be required to register for Goods and Services Tax and Harmonized Sales Tax (GST/HST) purposes.

On November 30, 2020, the Deputy Prime Minister and Minister of Finance of Canada, the Honourable Chrystia Freeland, tabled the Fall Economic Statement 2020 which proposes to broaden the obligation to register for and collect GST/HST for certain foreign suppliers working in e-commerce.

Currently, the GST/HST system provides that only one person making taxable supplies in Canada in connection with a commercial activity or business that the person operates is required to register for and collect the GST/HST.

Additionally, a consumer or any person who acquires intangibles or taxable services in Canada outside the person’s commercial activity is required to self-assess and pay applicable GST/HST directly to the Canada Revenue Agency (CRA). Currently, the GST/HST is not collected on the purchase of intangibles or services from non-resident vendors and is not paid by consumers who do not self-assess.

Generally, the new measures proposed will require that non-resident suppliers register for and collect GST/HST when they provide digital products or services to consumers in Canada. These new rules will also apply to digital platforms that facilitate third-party sales.

With the announcement of these new measures, the federal government has put in place similar rules to those that went into effect on January 1, 2019 for the purposes of Quebec Sales Taxes (QST), which are in line with market trends, as recommended by several international jurisdictions. Download our document for an overview of the proposed measures.