On November 30, 2020, the Canada Revenue Agency (CRA) announced changes to its approach to e-commerce for non-resident suppliers of goods, digital products and services. Here is how to navigate through them, as they may have significant impact on your business.
ONLINE MARKETPLACES AND FULFILMENT WAREHOUSES
Many online vendors sell their goods to Canadians through online marketplaces such as Amazon. These online marketplaces generally fulfil orders but do not own the merchandise being sold. Therefore, GST/HST is not consistently applied on the sale of these products.
The proposed changes would require online marketplaces (defined as distribution platforms) to collect and remit GST/HST on sales to Canadian purchasers by non-registered vendors, effective July 1, 2021. This change would also apply to non-residents who sell merchandise through their own websites, forcing all non-resident vendors of merchandise to register for the GST/HST if selling into Canada on their own account.
Many non-resident vendors are already registered, so it may be business as usual for them. However, if selling exclusively through distribution platforms in Canada, you may want to consider changes to your GST/HST registration status. This is not possible if you also sell to Canadians through your own website.
If your goods are stored at fulfilment warehouses in Canada, these fulfilment warehouses would be required to notify the CRA that they are holding and distributing goods of non-resident vendors.
Goods imported to Canada would continue to be subject to applicable duties and GST at the time of importation, at the rate of 5% on the duty-included price.
Please make sure you factor in applicable duty when selling in Canada either through distribution platforms or through your own website, as this can severely impact your profit margin.
Legislative changes will be made for non-registered non-resident vendors to assign and recover GST/HST paid at the border from the distribution platforms. Furthermore, no GST/HST will apply to platform services (Amazon fees) to the non-registered non-resident vendor.
Based on the above changes, many non-resident vendors may want to review how to conduct business in Canada, given these new rules.
There are also changes made on the provincial level in Saskatchewan, which parallel the above. Over the next few months, we must stay tuned for developments in Quebec, British Columbia and Manitoba to see if these provinces will change their respective legislation in order to harmonize with the Federal changes.
Our Tax Team can help you measure the impact of these changes on your business. Do not hesitate to contact us for any questions.