Non-Resident Vendors and the GST

The Goods and Services Tax (“GST”) is a Canadian sales tax of 5% levied on all goods and services (“supplies”) made in Canada. Anyone making a supply in Canada must register for the GST, collect the tax from its customers, and remit the tax to the government.

Now, I hear what you’re saying: What about me? I’m a non-resident of Canada. Surely, I don’t have to comply with this nonsense.

If you cross the border to sell that snake oil, you may have to charge the GST.

Well, perhaps you do. Any non-resident who carries on a business in Canada must register.

Are you carrying on a business in Canada? The law here is not simple. The answer is, it depends on your level of activity. You must have a substantial presence in Canada, and your income-earning activities must be located here.

What do the courts and the CRA look for to make the determination? The CRA has outlined 12 factors:

1. The place where agents and employees of the non-resident are located;
2. The place of delivery;
3. The place of payment;
4. The place where purchases are made or assets acquired;
5. The place from which transactions are solicited;
6. The location of assets or an inventory of goods;
7. The place where business contracts are made;
8. The location of a bank account;
9. The place where a non-resident’s name and business are listed in a directory;
10. The location of a branch or office;
11. The place where the service is performed; and
12. The place of manufacture or production

The weight given to any one factor depends on the type of activity. For example, in the case of a leasing business, the location where the contract is signed and the location of the goods to be leased are two of the more important factors.

Carrying on business in Canada has income tax consequences as well, as we discussed in an earlier post.

Also, depending on the province, you may have to collect the HST (Harmonized Sales Tax), which combines the 5% GST with the province’s rates.

If your activities in Canada are on the rise, and you want to remain in good standing with the Canadian tax authorities, contact a Canadian tax advisor to ensure you don’t run in to any problems down the road.