Non-resident actors of the short-term accommodation industry may have to register, collect and remit GST/HST on their Canadian sales, and maintain additional records starting on July 1, 2021.
Under the current GST/HST rules, the supply of short-term accommodations made through a digital platform may be subject to GST/HST or not depending on various factors. With the implementation of the new proposed GST/HST rules, which should apply as of July 1, 2021, the government wants to ensure that the GST/HST will apply consistently with respect to all supplies of short-term accommodations facilitated through a digital platform (short-term accommodation platform).
The new proposed GST/HST rules, which were announced by the Government of Canada on November 30, 2020, would impose new GST/HST obligations to short-term accommodation platform operators.
It should be noted that new rules have also been proposed with respect cross-border digital products and services and fulfillment houses, which are discussed in Upcoming changes: GST/HST proposals for cross-border digital products and services and fulfilment warehouses.
Platform-based short-term accommodation
Registered GST/HST suppliers/owners of taxable short-term accommodations
Pursuant to the proposed changes, registered GST/HST suppliers/owners of taxable short-term accommodations would continue to be required to account for the GST/HST on their supply of short-term accommodations made through a short-term accommodation platform.
Definition of a taxable short-term accommodation
A taxable short-term accommodation would generally includes the rental of a residential complex, unit or part of a unit for a period of less than one month and a price above CA$20 per day (short-term accommodation or short-term accommodations).
Short-term accommodation platform operators deemed to be the supplier of supplies of short-term accommodations made by non-registered suppliers
Short-term accommodation platform operators that facilitate the supply of a short-term accommodation made by non-registered suppliers/owners through their platforms would be deemed to be the supplier of the supply they facilitate (deemed accommodation supply), and therefore might be required to register, collect and remit the GST/HST on such supply.
Definition of a short-term accommodation platform operator
For the purposes of the proposed new measures, a short-term accommodation platform operator would be a person that controls or sets the essential elements of the transaction between a third-party vendor and the customer, for example, by providing listing services in respect of supplies of short-term accommodation in Canada and setting payment terms and conditions. If no such person exists, the operator would be a person that is involved, directly or through arrangements with third parties, in collecting, receiving or charging payment in respect of supplies of a short-term accommodation in Canada, and transmitting payment to the third-party supplier/owner. However, a short-term accommodation platform operator would not include a person that operates a website that simply allows vendors to list their properties for short-term rental, such as a classified or advertising website, or is solely a payment processor.
Short-term accommodation platform operators that are required to register and collect the GST/HST
Short-term accommodation platform operators who facilitate or expect to facilitate taxable supplies of a short-term accommodation in Canada by third-party suppliers/owners not registered for GST/HST purposes in excess of CA$30,000 over a 12-month period, would be required to register for GST/HST purposes, collect the tax on those supplies and remit it to the CRA. If the short-term accommodation platform operator carries on a business in Canada, it would be required to register under the normal GST/HST system. If the short-term accommodation platform operator does not carry on a business in Canada (non-resident short-term accommodation platform operator or non-resident short-term accommodation platform operators), it would have the choice to register under the normal GST/HST system or under a simplified online registration/remittance system as outlined below.
Simplified online registration/remittance system
As mentioned above, non-resident short-term accommodation platform operators would be able to register for GST/HST purposes under a simplified registration/remittance system. The government would put in place a simplified online registration and remittance system that would, however, not allow the registrants to claim input tax credits (ITCs) for the tax paid on the inputs they acquired and used in their commercial activities. The current rules would continue to apply, meaning that non-resident short-term accommodation platform operators would have the option to register under the normal GST/HST rules in order to claim ITCs.
Collection and remittance of the GST/HST by non-resident short-term accommodation platform operators
Non-resident short-term accommodation platform operators using the simplified registration/remittance system would be required to collect GST/HST, but only on the supply of a short-term accommodation made to a consumer in Canada. For the purposes of the proposed new measures, a consumer would be any entity or person not registered for GST/HST purposes (consumer or consumers). It should be noted that the government would impose penalties on persons that provide a GST/HST registration number in order to evade, or attempt to evade, tax on a supply acquired for personal consumption.
Service provided by short-term accommodation platform operators
Registered short-term accommodation platform operators would be deemed to not have made a supply of a service to a non-registered third-party suppliers/owners relating to facilitating their supply of a short-term accommodation. Therefore, no GST/HST would be collectible on such service. However, a registered short-term accommodation platform operator would be required to collect the GST/HST on the service fee or commission charged by it to the guest who is acquiring the short-term accommodation for the services it provides in helping the guest to find and book an accommodation and facilitating the transaction between the guest and the supplier/owner.
Short-term accommodation platform operators reporting and record keeping obligations
Short-term accommodation platform operators would be required to maintain records and information on the underlying third-party owners/suppliers using their platforms.
On December 21, 2020, the Government of Québec announced that changes would be made to the QST system in order to incorporate the new proposed GST/HST measures in it with all necessary adaptations.
The new rules outlined above would generally apply to supplies made on or after July 1, 2021 and supplies made before July 1, 2021 if all the consideration is payable on or after July 1, 2021. Therefore, businesses should begin to review their activities in Canada to determine if they would be required to register and/or to collect and remit the GST/HST on sales or facilitated sales of short-term accommodation in Canada. They should also review their taxable expenses incurred or expected to be incurred in Canada to determine whether or not they should register under the simplified or the normal GST/HST registration systems.
Our Sales Tax Team will be more than happy to help you review the impact of the new rules on your business and comply, as the case may be, with your new obligations, including by registering your business to the GST/HST registry under the simplified or the normal GST/HST registration systems.
- For more information, see Supporting Canadians and Fighting Covid-19, Fall Economic Statement 2020, Finance Canada, November 30, 2020.↩
- For more information, see Information Bulletin 2020-15, Announcement regarding the Québec Sales Tax for Electronic Commerce and other Changes to the Tax System, Québec Ministry of Finance, December 21, 2020. ↩