Fall Economic Statement 2020: GST/HST measures targeted at the digital economy

December 7, 2020 | Colleen Ma

On November 30, 2020, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, tabled Supporting Canadians and Fighting COVID-19: Fall Economic Statement 2020 (the “Economic Statement”).

The Economic Statement announced major changes to the GST/HST regime as it relates to e‑commerce and the digital economy. The current GST/HST system is mostly reflective of a 1990’s‑era economy. However, over the years, we have seen the development of new digital products and services and the evolution of the commercial and retail landscape.

Generally, the measures announced in the Economic Statement affect non‑resident vendors that do not carry on business in Canada, online marketplace facilitators / operators of distribution platforms, fulfilment businesses, online accommodation platform operators and third‑party property owners.

Cross-Border Digital Products and Cross-Border Services

The Economic Statement announced that non‑resident vendors that supply digital products or services (digital and traditional) to consumers in Canada will be subject to simplified GST/HST registration requirements and will now have collection and remittance obligations. Similar obligations will be imposed on non-resident distribution platform operators that facilitate the supply by those vendors. Collection and remittance obligations will only apply with respect to supplies made to Canadian consumers. The simplified registration will only apply to non‑resident vendors and distribution platforms that do not carry on business in Canada.

Goods Supplied through Fulfillment Warehouses

Where goods are sold by a non‑resident vendor directly, and the goods are located in a fulfillment warehouse in Canada (or shipped from a place in Canada to a purchaser in Canada), the Economic Statement announces proposed measures that will require the vendor be registered for, collect and remit GST/HST in respect of those sales.

Further, it is proposed that distribution platform operators be required to register for GST/HST and collect and remit GST/HST on sales made by non‑registered vendors through the platform in situations where the goods are located in a fulfilment warehouse in Canada (or shipped from a place in Canada to a purchaser in Canada). Further, amounts charged by a distribution platform operator to a non‑registered third‑party vendor will no longer be considered a “supply” and be subject to GST/HST. In addition, distribution platform operators will be required to report information to the CRA on the third‑party vendors that use their platform.

These measures will also require fulfillment businesses in Canada to notify the CRA that they are carrying on such a business and to maintain records regarding their non-resident clients and the goods they store on behalf of their non‑resident clients.

Platform-based Short‑Term Accommodation

Some property owners that list their property on online accommodation platforms are required to charge GST/HST on the rental while others are not. The Economic Statement announced proposed measures to ensure that GST/HST applies consistently and effectively to all short‑term accommodation supplies listed on an accommodation platform.

The Economic Statement announced that GST/HST will apply to all taxable supplies of short‑term accommodation in Canada that are facilitated by an accommodation platform. Further, registration, collection and remittance, and record keeping obligations will be imposed on the accommodation platform operator. In addition, amounts charged by the accommodation platform operator to non-registered third-party property owners will no longer be considered a “supply” and be subject to GST/HST, but GST/HST will apply to guest fees charged by the platform to guests.

Businesses Should Prepare for Changes

These measures are intended to be effective July 1, 2021.

If you are concerned that these proposals may change how you do business, the members of the Miller Thomson LLP Sales, Commodity and Indirect Tax Group are available to assist.