What is Canada’s tax rule for digital sales?
The government of Canada declared its new taxation norms for foreign businesses selling goods and services to Canadians through digital platforms for digital sales. In November 2020, the Canadian government announced its decision to mandate every foreign business owner to collect GST (Goods and Services Tax) or HST (Harmonized Sales Tax) from the consumers. The rule has come into force since July 1st, 2021, nine months after the declaration. Therefore, it has become necessary for every business operating in Canada to contact the best Canadian Tax Consulting Service and make the arrangements to comply with this rule. Here is everything that the new tax rule entails.
New Tax Rules For Digital Sales In Canada
The new tax rules apply to non-resident selling products and services like subscription-based online video streaming. Also, people offering accounting and legal services are likely to charge taxes. The Canadian government has justified this new tax law as a measure to bring fair sales practices and healthy competition in the digital market. Here are some facts that explain this ideology.
- Earlier, foreign vendors could sell their products at a lower price compared to resident vendors, given they do not have to charge any taxes.
- This tax disparity was leading resident vendors to lose business to foreign sellers on account of taxes.
- Michael Litchi justifies the government’s stand claiming that this new legislation will guard Canadian businesses against losing customers at a cost disadvantage.
So, now every business that sells goods and services to any Canadian customer needs to abide by this new tax law. International tax consultants in Toronto are helping foreign vendors to register their business under the GST/HST regime.
Tax Rates Finalised Under This Rule
- The new tax regulations relate to cross-border digital services and products, goods that are supplied through the fulfillment warehouses in Canada and short-term platform-based accommodations. As per the new regulations, businesses have to pay the taxes as per the location they are operating in!
- 5% GST will apply in British Columbia, Alberta, Quebec, Manitoba, the Northwest Territories, Saskatchewan, and Nunavut.
- 13% HST is applicable in Ontario.
- 15% HST is applicable in Newfoundland, New Brunswick, Nova Scotia, and Labrador.
The detailed rate charts are available with the accounting service providers in Canada, and businesses can follow their instructions.
Everything A Digital Business Owner Has To Do
Non-resident vendors selling their products in Canada will have to register their business under HST/GST rules. Once they get their GST number, they need to collect and remit the eligible amount of taxes from the consumers. US tax consultants in Toronto have welcomed this decision and are helping in the registration process. For operating legally on digital platforms, businesses must check provincial considerations and abide by this new law.
