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Non Resident Sellers in Canada:
There are various Canadian sales tax rates imposed federally and provincially. Three major components are:
GST
PST
HST - combining GST + PST into a harmonized rate
Some provinces combined the GST and PST into a Harmonized Sales Tax (HST) while other provinces maintained separation of the two taxes, federal and provincial.
The three Territories and Alberta have no provincial tax at all. Quebec has the highest provincial sales tax (possibly because they have more signage that needs translating - ok I do not really know why).
HST rates range between 13-15% and PST rates range between 5 and 9.975%.
GST must be paid by the importer at the Canadian port of entry when imported to Canada and collected (at a rate of 5%) by the friendly Canadian Border Services Agency (hey - some of them are really cool - eh!). If the goods are making their way to a province with HST, the provincial component of the Harmonized Sales Tax (HST) may also be collected by the men and women who guard are borders (CBSA).
If the importer is also a registrant of the GST/HST - they can recover this tax as a Input Tax Credit (ITC) and the net amount owing is paid to CRA (Canada Revenue Agency - they are nice people too. Well most of them).
When business sell into Canada, the most important question is: "must you register and collect sales tax?"
If you (vendor/supplier/business) provide taxable supplies in Canada, you may be required to register if your goods- end destination is to be delivered to a Canadian Resident.
If selling goods to consumers in British Columbia, Saskatchewan, Manitoba, and/or Québec, the business also needs to consider whether it is required to register and collect provincial sales tax in those provinces in addition to registering and collecting the GST/HST.
The provincial sales tax in these provinces are imposed pursuant to different legislation that, except for Québec, is significantly different than the GST/HST regime.
There is a small supplier rule - where those businesses not selling more than $30,000 worth of goods are not required to register >>> however, the first sale in which results in an amount over this thresh hold; GST on that sale and subsequent sales must be garnered.
The non-resident vendor may also claim ITC (Input Tax Credits) on any supplies in which they paid GST on their purchases and remit the difference to CRA.
Effective on July 1, 2021 the changes to the GST/HST tax regime as it relates to E-commerce and digital sales is now in effect.
Businesses involved in E-commerce sales (except those exempt due to the small supplier rule above) must register and collect and remit the GST/HST under the normal or simplified regime.
Businesses involved in e-commerce transactions are categorized as follows:
Digital Product or Services -
Goods Supplied Through Fulfillment Warehouses Located In Canada
Third Party Fulfillment Warehouses Operating in Canada
Short-Term Accommodation Suppliers and Platforms
The new simplified regime will operate as follows:
There will be a simplified process for online registration and remittances through an online portal.
Registrants under the new regime will only be required to collect and remit GST/HST on business-to-consumer (B2C) sales of digital products and services. For these purposes, an entity or person that is registered for GST/HST and provides its GST/HST registration number to the registrant will be considered a business, and any other entity or person will be considered a consumer.
In general, the application of tax will be based on the consumer’s usual residence, which will be determined by specified indicators, such as the home address, billing address, Internet Protocol address of the device used, bank or payment information and the recipients’ subscriber identification module (SIM) card. Typically, a consumer’s usual place of residence will be considered to be in a particular place if two or more of the specified indicators identify that place as the consumer’s normal location or residence.
Where the consumer’s usual place of residence is in Canada, the GST/HST collected is based on the GST/HST rate that applies in the specified province of usual residence. However, there will be exceptions to the general rule for transactions where a consumer’s usual place of residence is not an appropriate basis to determine the application of tax, as illustrated by the following examples:
Where the digital product or service is linked to a specific location in Canada, the GST/HST rate used should be the rate that applies in the province or territory of that specific location; therefore, if a non‑resident supplier provides remote security monitoring services for a cottage or condominium in Alberta to a consumer whose usual place of residence is in Ontario, the non‑resident would be required to collect 5% GST because the service relates to real property situated in Alberta.
Where the digital product or service made to a consumer whose usual place of residence in Canada is linked or restricted to a specific location outside Canada, such as services or rights to be performed at a readily identifiable location outside Canada (e.g. a restaurant meal, spa session or other personal service at a location outside Canada), no GST/HST is collectible.
Non‑resident vendors and non‑resident distribution platform operators registered under the simplified regime cannot claim input tax credits (ITCs) to recover GST/HST paid on their business inputs. If they wish to claim ITCs to recover GST/HST paid on their business inputs, they may register under the regular GST/HST regime.
Businesses can apply to remit and report taxes in a foreign currency.