Tax Insights: New Canadian GST/HST filing requirement for non-residents that provide services to Canadians

Issue 2021-21

In brief

Unbeknown to many non-residents of Canada, effective July 1, 2021, non-residents that provide services to persons that reside in Canada may be required to:

• register for Canada’s Goods and Services Tax and Harmonized Sales Tax (GST/HST), and 

• charge and collect GST/HST on services that they provide to Canadian residents that are not registered for GST/HST

Although the primary target of the new rules was electronic supplies made through a “digital platform” and “accommodation platform operators,” the rules apply to most services including investment advisory and portfolio management services.

In detail

Overview of new registration rules for service providers

The new “Electronic Commerce” registration rules are provided in Subdivision E of Division II of the Excise Tax Act (ETA) and subsection 211.12(2) requires a “specified non-resident supplier” that is not registered for GST/HST under the regular rules to register under this new regime if the “threshold amount” of the person exceeds $30,000 per annum. Excluding the references to accommodation platforms and operators of a digital platform, the “threshold amount” is defined by reference to the consideration payable for a “specified supply” that is made to a “specified Canadian recipient.”

A “specified supply” is broadly defined to include most services, except for those that are expressly excluded, including those that:

• may only be consumed or used outside Canada

• relate to real property situated outside Canada, or 

• are rendered in connection with criminal, civil or administrative litigation (other than a service rendered before the commencement of such litigation) that is:

  • under the jurisdiction of a court or other tribunal established under the laws of a country other than Canada, or 

  • in the nature of an appeal from a decision of a court or other tribunal established under the laws of a country other than Canada 

As the exclusions are fairly limited, most services that are provided by non-residents (including investment advisory services) will be considered a “specified supply.”

A “specified Canadian recipient” is generally defined as a person that is a resident of Canada that has not provided the supplier with evidence that they are registered for GST/HST. A specified Canadian recipient means a recipient of a supply in respect of which the following conditions are met:

• the recipient has not provided to the supplier, or to a distribution platform operator in respect of the supply, evidence satisfactory to the Minister that the recipient is registered under Subdivision D of Division V of the ETA, and

• the usual place of residence of the recipient is situated in Canada

Pursuant to subsection 211.14(1) of the ETA, persons that are registered under this new regime are required to collect tax on a “specified supply” that is made to a “specified Canadian recipient.” Accordingly, for purposes of determining whether they are required to be registered, most non-residents that provide services to Canadian residents should:

• obtain evidence from their Canadian customers on whether they are registered for GST/HST, and 

• monitor whether the quantum of supplies made to Canadian residents that are not registered exceed, on a collective basis, more than $30,000 per annum

To the extent the quantum of fees earned from Canadian residents that are not registered is expected to exceed $30,000, the non-resident supplier should register and collect GST/HST on services provided to Canadian residents that have not provided evidence that they are registered for GST/HST.

The takeaway

Non-residents of Canada that provide services, including investment advisory and portfolio management services, to persons that reside in Canada should be aware of these new GST/HST rules, as they may be required to register for GST/HST and charge and collect GST/HST on those services. PwC can help determine whether these new GST/HST rules apply to you and help you comply with them.