Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Client Address]
Case Number: 247166
Business Number: N/A
Attention: [Client]
Dear [Client]:
Subject: GST/HST interpretation
Requirement to register for GST/HST
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the requirement to register for GST/HST.
The HST applies in the participating provinces at the following rates: 13% in Ontario; 14% in Nova Scotia; and 15% in New Brunswick, Newfoundland and Labrador and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand the following based upon your correspondence submitted [mm/dd/yyyy], the supplemental documents submitted [mm/dd/yyyy], and [mm/dd/yyyy], and my various telephone conversations with […]:
1. […] ([…][The Company]) is a company incorporated […][outside of Canada].
2. [The Company] provides B2B software services through it’s content marketing platform (Platform). The Platform is accessible through the URL […][the Company’s Website].
3. Businesses ([The Company’s] Customers also referred to interchangeably as […][the Requestors] within this letter) who subscribe to the Platform have access to editorial, creative and strategic services. [The Company’s] Customers will have the opportunity to contract with […] writers, editors, content creators ([…][the Suppliers]) over the Platform to satisfy the specific need(s) of their businesses. Through the Platform, [the Company’s] Customers can receive the following:
Software subscription – Access to the Platform
Content […] – Content created by [the Suppliers] in written, visual or video form. […][details of services]
Services:
Editorial Services (Fixed Hours) – […][details of services]
Editorial Services (Flex Hours) – […][details of services]
Business Services – Platform and Tech Support
Strategy Services – […][details of services]
4. [The Company’s] Customers will receive a Statement of Work (SoW) which will identify the specific services being offered by [the Company] (some of which may be performed by [the Suppliers] as noted above), in conjunction with their subscription to the Platform. The SoW also makes reference to the […]([…][Agreement]). You have provided an unsigned copy of the [Agreement] for our review. Portions of the [Agreement] are stated, in part, as follows:
“This […][Agreement] (…) is between [the Company] (…) and Customer (…).
[…] Platform Subscription – […]
[…] Content Requests – […]
[…] Acceptance of Submissions – […]
[…] Rights to Submissions – […]
[…] Invoicing and Payment – […]
[…] Content Fees – […]”
5. The […][Supplier Agreement], as found on […][the Company’s website], notes, in part, the following:
“The […][Supplier Agreement] is hereby made by and between you [the Supplier] and [the Company].
[…] Project Requests […]
[…] Acceptance of Submissions […]
[…] Intellectual Property Rights […]”
6. [The Company] currently has Canadian resident corporations – medium to large businesses – who are [the Company’s] Customers. These are corporations which [the Company] believes are registered for GST/HST purposes.
7. [The Company] is paid by [the Company’s] Customers and, in turn where applicable, [the Company] pays [the Suppliers] via PayPal. [The Suppliers] will not accept payment or compensation directly from [the Company’s] Customers.
8. […][None of] [the Company’s] employees are resident in Canada.
9. [The Company] does not have any Canadian bank accounts.
10. Total [Suppliers] in [the Company’s] network is approximately […] in the database with […][approximately 19%] being resident in Canada.
11. [The Company] is not registered for GST/HST purposes (i.e.: regular or simplified regime).
12. Contract between [the Company] and [the Company’s] Customers is concluded outside Canada.
13. The Platform is hosted on a server located […][outside of Canada].
14. [The Company] advertises to the Canadian market.
RULING REQUESTED
You would like to know the following:
1. Is [the Company] carrying on business in Canada and required to register for GST/HST purposes under Subdivision D of Division V (regular registration regime)?
2. Is [the Company] required to register for GST/HST purposes under Subdivision E of Division II (simplified registration regime)?
As noted in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, a ruling provides the Canada Revenue Agency’s (CRA) position on specific provisions of the legislation as these relate to a clearly defined fact situation of a particular person, and where all of the relevant facts and supporting documentation have been presented in writing. As we are not in possession of all of the pertinent facts, we are unable to provide a ruling. However, we are pleased to provide an interpretation of the relevant ETA provisions for your assistance.
INTERPRETATION GIVEN
1. Requirement for registration under Subdivision D of Division V (regular GST/HST registration regime)
Under subsection 240(1), every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is generally required to be registered for GST/HST purposes, with certain exceptions. One exception arises where the person is a non-resident (that is, not resident in Canada) who does not carry on any business in Canada.
In general, a non-resident person must have a significant presence in Canada to be considered to be carrying on business in Canada. Whether a person is carrying on business in Canada for GST/HST purposes is a question of fact requiring consideration of all relevant facts. The factors that the CRA considers in determining whether a person is carrying on business in Canada for GST/HST purposes are set out in GST/HST Policy Statement P-051R2, Carrying on Business in Canada. As stated within P-051R2, the factors that will be considered in determining whether a non-resident person is carrying on business in Canada for GST/HST purposes in a particular situation include:
* the place where agents or employees of the non-resident are located;
* the place of delivery;
* the place of payment;
* the place where purchases are made or assets are acquired;
* the place from which transactions are solicited;
* the location of assets or an inventory of goods;
* the place where the business contracts are made;
* the location of a bank account;
* the place where the non-resident's name and business are listed in a directory;
* the location of a branch or office;
* the place where the service is performed; and
* the place of manufacture or production.
The importance or relevance of a given factor in a specific case depends on the nature of the business activity under review, and, as always, the particular facts and circumstances of each case. The determination of whether a non-resident is carrying on business in Canada for GST/HST purposes does not involve the mechanical application of a numerical test that is simply based on whether a specific number of the above factors are present in any given case. Rather, the determination requires judgment in establishing the importance of each factor in light of the type of supply that is being made in the context of the relevant facts.
Where it is determined that a non-resident does not have a significant presence in Canada, the non-resident will not be considered to be carrying on business in Canada and not have a requirement to register under the regular GST/HST regime. In [the Company’s] case, the only presence in Canada would appear to be the fact that [the Company] solicits to the Canadian market. This in and of itself is likely not a representation of a significant presence in Canada in relation to the nature of [the Company’s] business activity.
2. GST/HST and the digital economy measures (post June 30, 2021 period)
The ETA was amended, effective July 1, 2021, to include GST/HST provisions that generally apply to non-resident vendors and distribution platform operators that participate in the digital economy. These provisions are found under Subdivision E of Division II of the ETA.
The following definitions are found in subsection 211.1(1):
“specified non-resident supplier” means a non-resident person that does not make supplies in the course of a business carried on in Canada and that is not registered under Subdivision D of Division V.
“specified supply” is defined, in part, as a taxable supply of intangible personal property or a service other than:
(a) a supply of intangible personal property that
(i) may not be used in Canada,
(ii) relates to real property situated outside of Canada, or
(iii) relates to tangible personal property ordinarily situated outside of Canada;
(b) a supply of a service that
(i) may only be consumed or used outside of Canada, (…)
“specified Canadian recipient” means a recipient of a supply in respect of which the following conditions are met:
(a) the recipient has not provided to the supplier, or to a distribution platform operator in respect of the supply, evidence satisfactory to the Minister that the recipient is registered under Subdivision D of Division V; and
(b) the usual place of residence of the recipient is situated in Canada.
“specified distribution platform” means a digital platform (Footnote 1) through which a person facilitates the making of specified supplies by another person that is a specified non-resident supplier or facilitates the making of qualifying tangible personal property supplies by another person that is not registered under Subdivision D of Division V.
“distribution platform operator”, in respect of a supply of property or a service made through a specified distribution platform, means a person (other than the supplier or an excluded operator in respect of the supply) that
(a) controls or sets the essential elements of the transaction between the supplier and the recipient;
(b) if paragraph (a) does not apply to any person, is involved, directly or through arrangements with third parties, in collecting, receiving or charging the consideration for the supply and transmitting all or part of the consideration to the supplier; or
(c) is a prescribed person.
2.1 Are “specified supplies” being made?
Based on your incoming submission, the SoW and the [Agreement], it has been presented that various supplies are being made. Of these supplies, some are supplied directly from [the Company] to [the Company’s] Customers (i.e. subscription to the Platform, Business & Strategy Services) while other supplies (i.e. supplies of editorial and content services) are made indirectly through the Platform by [the Suppliers] to [the Requestors].
GST/HST Technical Information Bulletin B-090 – GST/HST and Electronic Commerce notes that a supply made by electronic means is characterized as either a supply of intangible personal property or a supply of a service. As noted in B-090:
“V. Subscriptions to databases and Web sites
These supplies typically involve a provider making digitized content available to customers for search, retrieval and use. They are generally characterized as supplies of intangible personal property.”
Also, example 19 within B-090 notes that a supply of content for a Web site operator could be characterized as a supply of a service or intangible personal property:
“A Web site operator pays various content providers for news stories, information, and other on-line content to attract users to a site. Alternatively, the Web site operator might hire a content provider to create new content specifically for the Web site.
This could be characterized as either a supply of a service or intangible personal property, depending upon the facts.”
As it does not appear that any of the exclusions within the definition of “specified supplies” appear to be applicable to the above noted supplies, it is likely that specified supplies (i.e.; supplies of services and/or intangible personal property) are being made either directly by [the Company] or through the Platform.
2.2 Is there a “specified distribution platform”?
As defined above, a specified distribution platform means “a digital platform through which a person facilitates the making of specified supplies by another person that is a specified non-resident supplier (…)”.
In the context of the current case, […][the Company’s Platform] would satisfy the definition of “digital platform” as the Platform is an online digital marketing marketplace/website which is accessed through [the Company’s] website […].
The [Supplier] supplies of editorial and content services do not appear to be excluded from the definition of “specified supplies” as previously mentioned.
Without the use of the Platform, [the Suppliers] are not able to provide the content and editorial services to [the Requestors]. Not only does [the Company] bring [the Supplier] and [the Requestor] together, [the Company] facilitates the payment of funds by receiving the consideration of the supply (i.e.: the “content fees/project fees”) from [the Requestor] via PayPal (Footnote 2) and then forwards this payment to the [Supplier]. With these factors present, we may infer that [the Company] is likely facilitating the making of specified supplies over the Platform.
As the Platform is “a digital platform through which a person ([the Company]) facilitates the making of specified supplies ([…] content and editorial services) by another person that is a specified non-resident supplier ([the Suppliers] that are non-residents and not registered under Subdivision D of Division V)”, the Platform appears to satisfy the criteria within the definition of a “specified distribution platform”.
2.3 Is there a “distribution platform operator”?
As noted in the definition of “distribution platform operator”, a person, other than the supplier or excluded operator (Footnote 3), is a distribution platform operator if they satisfy the criteria under paragraph (a), (b) or (c) of the definition.
2.3.1 Paragraph (a) – “controls or sets the essential elements of the transaction between the supplier and recipient”
In the context of this current case, [the Company] has terms and conditions with [the Company’s] Customers/[Requestors] in terms of utilizing the Platform as found in the [Agreement]:
“[…] Platform Subscription – […]
[…] Content Requests – […]
[…] Acceptance of Submissions – […]
[…] Rights to Submissions – […]
[…] Invoicing and Payment – […]
[…] Content Fees – […]”
Also, [the Suppliers] are bound to how their affairs are to be conducted with [the Requestors] as evidenced by the following excerpts from the [Supplier Agreement] signed with [the Company]:
“[…] Project Requests […]
[…] Acceptance of Submissions […]
[…] Intellectual Property Rights […]”
As demonstrated above, [the Company] has various terms and conditions in which the supplier ([the Supplier]) and recipient ([the Requestor]) must abide by in order to access and utilize the Platform for their needs (i.e. [the Supplier] making supplies or [the Requestor] acquiring [the Suppliers’] supplies). Paragraph (a) of the definition of “distribution platform operator” could possibly be satisfied as these terms and conditions appear have significant impact on the essential elements of the supply between [the Supplier] and [the Requestor].
2.4 Requirement to register under Subdivision E of Division II (simplified GST/HST registration regime)
Effective July 1, 2021, subsection 211.12(2) provides that non-resident suppliers who are not registered and are not carrying on business in Canada (specified non-resident supplier) or a distribution platform operator in respect of a supply made at any time, who make taxable supplies of intangible personal property or a service (specified supply) to recipients in Canada that did not provide the supplier with a proof of their GST/HST registration (specified Canadian recipient) are required to register under the simplified GST/HST registration regime, and to collect the GST/HST on these supplies.
The requirement for specified non-resident suppliers and distribution platform operators to register under the simplified GST/HST registration regime is based on whether their threshold amounts for any period of 12 months, determined under subsection 211.12(1), exceed $30,000. The threshold amount is generally the total of all amounts of:
* sales of specified supplies made to specified Canadian recipients by specified non-resident suppliers and
* the sales of specified supplies made to specified Canadian recipients by specified non-resident suppliers through specified distribution platforms.
2.4.1 Application to [the Company]
In relation to the first bullet point above, for those specified supplies which [the Company] supplies directly to [the Company’s] Customers (i.e. subscription to Platform, Business & Strategy Services) who are specified Canadian recipients, the value of these supplies would be included in the $30,000 threshold calculation.
The second bullet refers to specified supplies made by non-resident [Suppliers] who are not registered under Subdivision D which are facilitated by [the Company] through the [Company’s] Platform to [the Requestors] (i.e. supplies of editorial and content services). Where the recipient of these specified supplies are specified Canadian recipients, these supplies would be deemed (Footnote 4) to be made by [the Company] and their value would be included in the $30,000 threshold calculation.
As presented, [the Company] believes that [the Company’s] Customers/[Requestors] are not specified Canadian recipients as, pursuant to the statement of fact #6 above, some are Canadian resident corporations – medium to large businesses – which [the Company] believes are registered for GST/HST purposes. Once [the Company] can verify this assertion, then [the Company] will be able to determine whether it has exceeded the $30,000 threshold amount and if required to be registered under the simplified GST/HST registration regime pursuant to subsection 211.12(2).
As noted in the definition of “specified Canadian recipient”, the recipient must provide to the supplier or distribution platform operator evidence satisfactory to the Minister that the recipient is registered under Subdivision D of Division V. Non-resident suppliers would rely on the GST/HST registration number of the recipient as proof of its registration status.
For more information on confirming a GST/HST registration number of a recipient, please visit our website by following this link: https://www.canada.ca/en/revenue-agency/services/e-services/e-services-businesses/confirming-a-gst-hst-account-number.html
2.5 Supplemental reference material
Additional information regarding GST/HST obligations under the new digital economy measures may be found on the CRA’s website at: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/digital-economy.html
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
CONTACT
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 873-355-5326.
Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Sincerely,
David Agbetiafa
Senior Rulings Officer
Digital Economy Unit
General Operations and Border Issues Division
GST/HST Rulings Director
FOOTNOTES
1. As defined in subsection 211.1(1) “digital platform” includes a website, an electronic portal, gateway, store or distribution platform or any other similar electronic interface but does not include
(a) an electronic interface that solely processes payments; or
(b) a prescribed platform or interface.
2. Sections […] and […] of the [Supplier Agreement]
3. As defined in subsection 211.1(1) “excluded operator” means a person that, in respect of a supply of property or a service,
(a) meets all of the following conditions:
(i) the person does not set, directly or indirectly, any of the terms and conditions under which the supply is made,
(ii) the person is not involved, directly or indirectly, in authorizing the charge to the recipient of the supply in respect of the payment of the consideration for the supply, and
(iii) the person is not involved, directly or indirectly, in the ordering or delivery of the property or in the ordering or rendering of the service; (…)
4. 211.13(1) Specified Supply – Operator
“If a specified supply is made through a specified distribution platform by a specified non-resident supplier to a specified Canadian recipient and if another person registered under this Subdivision is a distribution platform operator in respect of the specified supply, then, for the purposes of this Part (other than section 211.1, paragraph 211.12(1)(c) and section 240)
(a) the specified supply is deemed to have been made by the other person and not by the specified non-resident supplier; and
(b) the other person is deemed not to have made a supply to the specified non-resident supplier of services relating to the specified supply.”
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