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Duty to Collect Goods and Services Tax in Canada

By Greg Gartner and Lindsay Kindrachuk, Moodys Gartner Tax Law LLP

Recipients of most supplies made in Canada must pay federal tax of 5% of the value of the supply, referred to as goods and services tax (GST) and legislated under Canada’s Excise Tax Act (the ETA). The supplier, however, has the duty to register to collect and remit this tax to the Canada Revenue Agency (CRA), with few exceptions, or risk assessment for the uncollected GST, plus interest and penalties. All but one province, Alberta, also have a provincial sales tax. Some provinces have “harmonised” their sales tax with the GST (e.g. Ontario) resulting in a higher rate (HST) to be collected and remitted to the CRA where supplies are made in that province, and others administer their own sales tax (e.g. British Columbia) requiring a separate consultation of that province’s sale tax legislation.

The ETA provides the conditions for supplies to be made either in or outside Canada, depending on the nature of the supply: tangible personal property (TPP), intangible personal property (IPP), or services. The determination requires detailed review of all contracts, including how and where the goods and services are delivered, and, in the case of IPP, whether it may be used in Canada. In this digital age, the distinction between a supply of IPP or a service is not always clear, nor is the place of supply for certain “remote” services. To help differentiate from a supply of IPP, a service generally involves specific work performed for a specific customer. A non-resident (NR) supplier may be relieved from its duty to register to collect GST on supplies in Canada if they do not “carry on a business in Canada”. Whether a NR is carrying on a business in Canada depends on the facts and circumstances of each business but there must generally be a “significant presence” in Canada.

In its Policy P-051R2, CRA lists many factors considered for this purpose – none are determinative, and the context of the business will affect the weight of each. In an e-commerce context, for example, weight must be given to digital infrastructure to attach a geographical presence to operations.

For some, determining the duty to collect GST on supplies made to Canadian customers will be straightforward, for others, it will be more involved. Keep in mind, however, that where a NR is not required to collect GST, it may be advantageous to register to collect and remit GST on a voluntary basis to recover GST that the NR must pay, such as GST which may be collected along with any customs duties by the Canada Border Services Agency on the importation of goods to Canada.


Greg Gartner

Greg Gartner

GGI member firm
Moodys Gartner Tax Law LLP
Fiduciary and Estate Planning, Law Firm Services, Tax
Calgary (AB), Edmonton (AB), Canada
T: +1 403 693 5100
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Moodys Gartner has one single focus: tax. They provide tax advisory and planning for individuals with personal and business interests on either side of the Canada-US border, no matter where they live in the world.

Greg Gartner, CA, MBA, LLB, QC, is Moodys tax’s director, Canadian Tax Law. Equipped with nearly 30 years of experience, Greg specialises in purchases and sales of businesses, corporate reorganisations, cross-border Canada/ US tax issues, and international taxation.
Lindsay Kindrachuk

Lindsay Kindrachuk

GGI member firm
Moodys Gartner Tax Law LLP
Fiduciary and Estate Planning, Law Firm Services, Tax
Calgary (AB), Edmonton (AB), Canada
T: +1 403 693 5100
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W: moodysgartner.com

Lindsay Kindrachuk, CPA, CA, has over 10 years’ experience delivering tax compliance, planning, and other tax advisory services to individuals, trusts/ estates, partnerships, and corporations, both resident and non-resident, and in the context of both income tax and sales tax.


Published: Indirect Taxes Newsletter, No. 10 Spring 2020 l Photo: malajscy - stock.adobe.com

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