Have you heard about the new GST/HST measures for supplies of cross-border digital products and services, as well as platform-based short-term accommodations? In recent months, Canada Revenue Agency (CRA) has been actively rolling out new rules and regulations to accommodate the needs of the digital economy. In an effort to keep up with the ever-evolving landscape of digital products and services, the CRA released Notice 332 on January 16th, 2021. This new notice provides guidance to those providing digital products and services to customers located in Canada. Below is a breakdown of everything you need to know to get the return that you deserve.
The simplified GST/HST registration framework for non-resident suppliers was created by the Canadian government to make it easier for digital platform operators to collect the Goods and Services Tax (GST) and the Harmonized Sales Tax (HST) on the supplies they provide. This framework sets out the rules and regulations that these suppliers must follow in order to properly collect the taxes. It also provides guidance on how to calculate and remit the taxes. The framework also outlines the penalties and interest that may apply if the taxes are not collected or remitted correctly. Basically, it helps digital platform operators figure out their tax obligations so they can stay on the right side of the law.
The primary focus of Notice 332 is to clarify the taxation of digital products and services when they are provided to customers located in Canada. This includes both goods and services provided through the internet, such as streaming services, music downloads, and software downloads. In addition, the notice covers digital products that are provided on a physical medium, such as CDs or DVDs.
Under the new rules, the CRA has established two different taxation scenarios for digital products and services. The first scenario applies to digital products and services that are purchased for consumption in Canada. In this case, the seller is required to collect the Goods and Services Tax (GST) from the customer. The second scenario applies to digital products and services that are purchased for consumption outside of Canada. In this case, the seller does not have to collect any taxes from the customer.
Under the typical GST/HST rules, if you’re registered to pay GST/HST, you need to show proof of registration to your suppliers. This can be done with either a business registration number or a GST/HST registration number, which is given out by the Canada Revenue Agency. By providing proof of registration, you won’t get charged GST/HST when you buy supplies from the supplier. If you have proof that you are not required to pay GST/HST, the supplier will not add it on. It is important to note, if you as a customer do not share your GST number to your digital suppliers, who are registered under the simplified GST framework, the clients cannot claim GST credits that these suppliers collected and remitted to CRA on their behalf.
All in all, the new GST/HST rules for digital products and services are complex and it is important to understand how they apply to your business. Be sure to check out CRA’s Notice 332 for more information and guidance on how the new rules apply to you. With the right information, you can make sure you are getting the returns you deserve.
If you have any questions or need help with the GST/HST registration process, don’t hesitate to reach out to LedgersOnline. Our team of experts can help you understand the process and provide ongoing support with any other GST/HST questions.