FOR LIVE PROGRAM ONLY Canadian VAT Issues for U.S. Sellers: Goods & Services Tax and Harmonized Sales Tax Requirements THURSDAY , MAY 30, 2019, 1:00-2:50 pm Eastern IMPORTANT INFORMATION FOR THE LIVE PROGRAM This program is approved for 2 CPE credit hours . To earn credit you must: • Participate in the program on your own computer connection (no sharing) – if you need to register additional people, please call customer service at 1-800-926-7926 ext. 1 (or 404-881-1141 ext. 1). Strafford accepts American Express, Visa, MasterCard, Discover . • Listen on-line via your computer speakers. • Respond to five prompts during the program plus a single verification code . • To earn full credit, you must remain connected for the entire program. WHO TO CONTACT DURING THE LIVE PROGRAM For Additional Registrations : -Call Strafford Customer Service 1-800-926-7926 x1 (or 404-881-1141 x1) For Assistance During the Live Program : -On the web, use the chat box at the bottom left of the screen If you get disconnected during the program, you can simply log in using your original instructions and PIN.
Tips for Optimal Quality FOR LIVE PROGRAM ONLY Sound Quality When listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection. If the sound quality is not satisfactory, please e-mail sound@straffordpub.com immediately so we can address the problem.
Canadian VAT Issues for U.S. Sellers May 30, 2019 Cyndee Todgham Cherniak, Founder Brian Litvin, Principal LexSage, Toronto, ON Litvin Muir , Toronto, ON cyndee@lexsage.com info@litvinmuir.com
Notice ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY THE SPEAKERS’ FIRMS TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN. You (and your employees, representatives, or agents) may disclose to any and all persons, without limitation, the tax treatment or tax structure, or both, of any transaction described in the associated materials we provide to you, including, but not limited to, any tax opinions, memoranda, or other tax analyses contained in those materials. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.
Canadian VAT Issues for US Sellers: Goods and Services Tax and Harmonized Sales Tax Requirements FOR: STRAFFORD PUBLISHING BY: CYNDEE TODGHAM CHERNIAK (@CYNDEELAW) BRIAN LITVIN, LITVIN MUIR DATE: MAY 30, 2019
Part I. Structure of Canada’s federal Knowledge and provincial sales tax/VAT system ∞ A. Goods and Services Tax ∞ Applies in every province and territory ∞ 5% ∞ B. Harmonized Sales Tax ∞ Applies only in Ontario, Nova Scotia, New Brunswick, Newfoundland/Labrador, Prince Edward Island ∞ 6-10% depending on province ∞ C. Quebec Sales Tax ∞ Applies only in Quebec ∞ D. Provincial Sales Tax ∞ Applies in British Columbia, Saskatchewan, Manitoba 6
Insight Part I: Canadian Sales Taxes Rate Chart (as at May 30, 2019) Province/ GST/HST PST GST Combined Territory Rate Rate Included in Rate Prov Rate British Columbia 5% 7% No 12% Alberta 5% 0% No 5% Saskatchewan 5% 6% No 11% Manitoba 5% 8% No 13% (July 1 (July 1 =12%) = 7%) Ontario 13% N/A No 13% Quebec 5% 9.975% Yes 14.975% Nova Scotia, New 15% N/A No 15% Brunswick, Newfoundland, PEI Territories 5% N/A No 5% 7
Value Part II: Registration Requirements ∞ Persons carrying on business in Canada must register for GST/HST purposes ∞ Persons carrying on business in Quebec must register for QST under the Quebec Sales Tax Act (separate registration than Federal GST/HST) ∞ Persons selling into British Columbia, Saskatchewan and/or Manitoba must register for PST under the separate systems ∞ Some services are not taxable in PST provinces ∞ Some intangible property (e.g., computer programs) is taxable 8
Practical Part II.A. Small Supplier Advice Exception ∞ If a person make supplies that are less than $CDN 30,000 a year, then the person is not required to register ∞ For non-resident persons, the test is $CDN 30,000 in world-wide sales (not sale in Canada) ∞ Small suppliers do not charge, collect and remit GST/HST ∞ Quebec has a similar small supplier exception 9
Experience Part II.B. Security Requirements ∞ Non-residents must post security ∞ Usually amount of security is 50% of anticipated net tax (GST or GST/HST) depending on the province ∞ Can post a bond or cash 10
Justice Part III. NEXUS Requirement ∞ For income tax purposes, a non-resident must pay Canadian income tax if the NR has a permanent establishment in Canada ∞ For GST/HST/QST purposes, a non-resident must register for GST/HST and QST (for Quebec) if it is carrying on business in Canada/Quebec. ∞ Carrying on business is covered by written policies 11
Strategies Part IV: Basic Rules as to GST/HST Tax Status ∞ Real property that is in Canada is subject to GST/GST ∞ TPP delivered in Canada is subject to GST/HST ∞ TPP delivered outside Canada is not subject to GST/HST ∞ Services delivered in part in Canada are subject to GST/HST ∞ Services delivered wholly outside Canada are not subject to GST/HST ∞ Services in respect of real property or TPP located in Canada are subject to GST/HST ∞ Intangible property that can be used in Canada is subject to GST/HST ∞ Intangible property that cannot be used in Canada is not subject to GST/HST 12
Strategies Part IV: Special Import Rules ∞ There are 4 categories of GST/HST supplies: ∞ Taxable supplies ∞ Zero rated supplies (GST/HST rate is 0%) ∞ Exempt supplies (no GST/HST is exigible) ∞ Non-Taxable supplies (limited list) ∞ There are 2 categories of GST/HST imposition rules: ∞ Domestic Supplies ∞ Imported Taxable Supplies ∞ TPP that is imported is subject to GST/HST at the border before release ∞ Importers must self assess GST/HST on imported services and intangible property 13
Strategies Part IV: Special Rules for Non- Canadian E-Commerce Resellers ∞ Quebec imposes QST on digital/streaming services ∞ Saskatchewan imposes PST on digital/streaming services (“E - commerce Services”) ∞ Alberta, British Columbia & the Territories do not currently impose sales tax on E-commerce Services ∞ Issue: whether E-commerce Services are subject to GST/HST if supplied by non-resident ∞ General rule: ∞ Non-residents are not required to register for GST/HST if they supply E-commerce Services to Canadian customers ∞ Canadian customers must self assess GST/HST as imported taxable supply of E-commerce Services 14
Strategies Part IV: Special Rules for Non- Canadian E-Commerce Resellers Type of Product Type of Vendor Monetary Payment of Collection Threshold Mechanism Digital Products or Non-residents If <$2 Vendor does not register/customer services purchased does not pay online (music, e-books, If >$2 Vendor does not register/customer Netflix) pays to Canada Domestic/ Residents If small supplier Vendor does not register/customer does not pay If not small supplier Vendor registers and customer pays Physical products being Non-Resident If <$20* & shipped No GST/HST is paid imported into Canada by post after being purchased If <$20* & shipped CBSA collects GST/HST at online by post border If <$20* shipped by CBSA collects GST/HST at courier border If imported by CBSA collects GST/HST at customer border * Threshold increases under USMCA 15
Strategies Part V. Calculating GST/HST/PST ∞ Determining the correct tax rate to charge on the supply of property or service is subject to the Place of Supply rules ∞ Sale of Goods – generally made in province where legal delivery takes place. ∞ Deemed Supply – if supplier either: – ships TPP to province that is specified in contract for carriage of the property OR – transfers possession to a common carrier that supplier retained on behalf of recipient to ship property to province 17
Strategies Part V. Calculating GST/HST/PST (Cont.) ∞ Real Property – supply is in the province in which the property is situated ∞ Intangible Personal Property – general rule is based on where the rights may be used 18
Strategies Part V. Calculating GST/HST/PST (Cont.) ∞ Services – there are specific place of supply rules for certain types of services, such as (partial list): ∞ Personal Services ∞ Services in relation to TPP ∞ Services in relation to real property ∞ Computer related services ∞ Premium telephone services ∞ Services not specified- there are general rules ∞ Rule 1 – Recipient’s address in Canada obtained – province of address ∞ Rule 2 – Recipient’s address in Canada not obtained – where service is performed primarily (>50%) ∞ Rule 3 – Recipient’s address in Canada not obtained – service performed equally in more than one participating province, supply is made in province supplier is most connected. 19
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