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: 245903
Business Number: […]
Dear [Client]:
Subject: GST/HST interpretation - Application of the GST/HST to cottage rental agency
Thank you for your correspondence of June 10, 2023, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to a cottage rental agency. We apologize for the delay in this response.
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.
Based on the information provided in your correspondence […] and your telephone conversations with our Unit, we understand the following:
1. You are one of the directors of […][the Company], a company registered for GST/HST purposes under number […].
2. You explain that one of your competitors (the “Competitor”), registered for GST/HST purposes under Subdivision D of Division V, provides cottage rental services […] and does not charge [GST/HST] on supplies of short-term accommodations that they help cottage owners make.
3. You provide us with a summary of your understanding of your Competitor’s involvement in a transaction between the supplier (i.e., cottage owner) and the recipient (i.e., guest), as follows:
a. The Competitor lists the cottage owner’s property on their website.
b. When a prospective guest is interested in booking a cottage, they are required to complete a cottage rental application. The rental application is made available to interested parties by your Competitor and it outlines the terms and conditions of the booking.
c. The cottage owner is responsible to review and approve/decline the rental application.
d. Once the rental application is approved, the guest provides payment for the booking directly to the cottage owner.
e. Your Competitor charges the owner a commission fee based on a percentage of the booking fees, on which the Competitor collects the HST.
f. Once the booking is completed, your Competitor does not play any further role in the making of the supply of short-term accommodation.
4. You explain that the agreements signed by the cottage owner and the guest are provided by your Competitor and their use is mandatory for every transaction.
5. You further state that, in your opinion, your Competitor should charge the [GST/HST] on supplies of short-term accommodation they help cottage owner make, since you believe that your Competitor is involved in setting the terms and conditions of the supply through the cottage rental application.
6. You also state that your Competitor does not charge the [GST/HST] on the supplies of short-term accommodation because it believes it is considered an excluded operator.
RULING REQUESTED
You would like to know whether your Competitor has an obligation to collect the [GST/HST] on supplies of short-term accommodations under Subdivision E of Division II of the ETA. More precisely, you would like to know whether your Competitor is the deemed supplier under paragraph 211.13(4)(a) and as a result is required to collect the [GST/HST] on taxable supplies of short-term accommodation situated in Canada that is made through the Competitor’s platform by cottage owners that are not registered for the GST/HST.
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
I. Digital economy rules
The CRA is responsible for administering the ETA, which governs the application of the GST/HST. The ETA generally requires every registrant making a taxable supply in Canada to collect the GST/HST from the recipient and remit it to the CRA. The ETA has been amended, effective July 1, 2021, to include GST/HST provisions that generally apply to non-resident suppliers, distribution platform operators and accommodation platform operators participating in the digital economy.
Under the digital economy provisions and particularly pursuant to paragraph 211.13(4)(a), where non GST/HST registered suppliers (i.e., cottage owners) make through an accommodation platform(Footnote 1) taxable supplies of short-term accommodation(Footnote 2) situated in Canada and where an accommodation platform operator(Footnote 3) is registered for GST/HST under Subdivision D of Division V (regular GST/HST registration), the accommodation platform operator is deemed to be the supplier of the short-term accommodation. In such circumstances, the accommodation platform operator registered under Subdivision D of Division V is required to charge, collect and remit the GST/HST on the supplies made through an accommodation platform.
In addition, where the deeming rule of paragraph 211.13(4)(a) applies and where the accommodation platform operator is required to charge, collect and remit tax on the supply of short-term accommodation, the digital economy measures pursuant to paragraph 211.13(4)(b) further provide that the supply of services, made by the accommodation platform operator to the non-registered suppliers (i.e., cottage owners) in relation to the supply of short-term accommodation, is not subject to tax. An example of this may be where an accommodation platform operator charges the supplier fees or commission fees for using the accommodation platform to supply the short-term accommodation.
Non-registered suppliers would generally include small suppliers (suppliers with taxable sales that do not exceed the threshold amount of $30,000). For more information on small suppliers please refer to GST/HST Memorandum 2.2, Small suppliers.
III. The deeming rules of subsection 211.13(4)
The application of the deeming rules of subsection 211.13(4) is contingent upon the fulfilment of the following three conditions:
1. A taxable supply of short-term accommodation situated in Canada is made through an accommodation platform;
2. The supplier of short-term accommodation (cottage owner) is not registered under Subdivision D of Division V; and
3. A person registered under Subdivision D of Division V is an accommodation platform operator with respect to the particular supply of short-term accommodation.
It must be noted that all three conditions stated above must be met with respect to the particular supply that is examined in order for the deeming rules to apply. To establish with certainty whether the deeming rules apply on a particular supply, the details of the transaction involving the supplier (cottage owner), the recipient (guest), and the platform must be provided. Where a specific supply/transaction is not provided, we cannot determine with certainty whether the deeming rules apply in respect to a supply of short-term accommodation. Nevertheless, we can provide you with the following information that may assist you in making such a determination.
1.1 Taxable supply of short-term accommodation situated in Canada
A supply of short-term accommodation is defined as a residential complex or a residential unit that is supplied to a recipient by way of lease, licence or similar arrangement for the purpose of its occupancy by an individual as a place of residence or lodging, if the period throughout which the individual is given continuous occupancy of the complex or unit is less than one month. If the rent charged for the supply of short-term accommodation is more than $20 per day, the supply is generally considered to be a taxable supply and the supplier is generally required to charge and collect the GST/HST on the rent.(Footnote 4) For more information please refer to GST/HST Memorandum 19.2.2, Residential Real Property - Rentals.
Where cottage owners offer their cottages for rent in Canada, for a period that is less than one month, at a rate that exceeds $20 per day, they would generally be considered to be making taxable supplies of short-term accommodation situated in Canada.
The term accommodation platform is defined under subsection 211.1(1) as a digital platform through which a person facilitates the making of taxable supplies of short-term accommodation situated in Canada by another person that is not registered under Subdivision D of Division V.
A person is generally considered to be facilitating the supply of short-term accommodation through a digital platform(Footnote 5), such as a website, for example, if it lists or advertises the supply on its website, thereby allowing the supplier and the recipient to find each other, with a view to the supply of short-term accommodation being made through the digital platform.
Also, in order to meet the first condition of the deeming rules, the particular supply has to be made through the digital platform. Generally, this means that there must be a large degree of involvement through the digital platform in making the particular supply of short-term accommodation by the person. An example of that would be where guests can book and pay for a particular cottage through the digital platform.
Condition 2: The supplier of short-term accommodation is not registered under Subdivision D of Division V
This condition would be met where the supplier, in most cases the cottage owner, is not registered under Subdivision D of Division V.
The term accommodation platform operator (“APO”) in respect of a supply of short-term accommodation made through an accommodation platform is defined under subsection 211.1(1) and means a person, other than the supplier or an excluded operator(Footnote 6) in respect of the supply, that:
(a) controls or sets the essential elements of the transaction between the supplier and the recipient; or
(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.
In accordance with the definition of an APO, a person (other than the supplier or an excluded operator) would be considered an APO, in respect of a supply of short-term accommodation made through an accommodation platform, if it meets either paragraph (a), (b) or (c) of the definition of APO. As there is currently no prescribed person, paragraph (c) does not apply.
To establish with certainty whether a person meets the definition of APO, the specifics of a particular transaction involving the supplier (cottage owner), the recipient (guest), and the platform must be provided. In this particular case, we can provide you with the following information that may assist you in making a determination on whether a person is an APO in respect of a supply of short-term accommodation made through an accommodation platform.
3(a) A person controls or sets the essential elements of the transaction between the supplier and the recipient (element (a) of the APO definition)
In essence, a person would be considered to control or set the essential elements of the transaction where, for instance, it provides listing services in relation to the supply of short-term accommodation and where it sets the payment terms and conditions with respect to the transaction between the supplier (cottage owner) and the recipient (guest).
In addition, a person would be considered to set payment terms and conditions for the transaction between the supplier and the recipient, if the person, for example, sets the rental price for the cottage or the payment terms and conditions between the supplier (cottage owner) and the recipient (guest).
3(b) Any person that 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 (element (b) of the APO definition)
Where it is established that a person does not control or set the essential elements of the transaction between the supplier (cottage owner) and the recipient (guest) for a particular supply, the person may still be considered an APO if it 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. An example of that, may be where a person receives the consideration for a booking from the guest and transmits it or part of it to the supplier (cottage owner).
3(c) A person is the supplier or an excluded operator
Pursuant to the definition of APO in subsection 211.1(1), a person may be excluded from that definition if it is considered to be the supplier or an excluded operator.
The supplier is generally the person making the supply of short-term accommodation(Footnote 7). In most cases, the supplier would be the cottage owner.
In accordance with the definition of excluded operator, under subsection 211.1(1), a person would be considered an excluded operator, in respect of a supply of short-term accommodation, if it meets either paragraph (a), (b), (c) or (d) of the definition. As there is currently no prescribed person, paragraph (d) does not apply.
Firstly, paragraph (a) of the excluded operator definition provides that a person, with respect to a supply of short-term accommodation, would be considered an excluded operator provided it fulfills all three 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.
Secondly, paragraph (b) of the definition of excluded operator provides that a person that solely provides for the listing or advertising of the property or service or for the redirecting or transferring to a digital platform on which the property or service is offered would meet the definition of excluded operator.
Thirdly, paragraph (c) of the definition of excluded operator provides that a person that is solely a payment processor would meet the definition of excluded operator.
We must note that, where the specific details of a particular supply/transaction are not provided, it is not possible to determine with certainty whether a person is an excluded operator with respect to a supply of short-term accommodation. Nevertheless, the information provided above may assist you in making such a determination.
V. Collection and remittance of the GST/HST
Section 165 of the ETA generally requires every recipient of a taxable supply made in Canada to pay the GST/HST on the value of the consideration paid or payable for the supply unless the supply is specifically exempt under Schedule V or zero-rated under Schedule VI. Subsection 221(1) further provides that every person who makes a taxable supply is required to collect the GST/HST that is payable by the recipient in respect of the supply and file a GST/HST return under subsection 238(1) for each reporting period of the registrant and to remit that tax in accordance with subsection 228(2).
The confidentiality provisions of the ETA do not allow us or any CRA official to comment on the tax issues of a third party without that party's written consent.
As Canada's tax system is based on self-assessment, each person is responsible to meet its tax obligations. The CRA is responsible for the administration of the ETA and its Regulations as enacted by Parliament and is committed to applying the tax legislation consistently and fairly, and it takes all allegations of non-compliance very seriously. In this regard, the CRA has a mandate to treat all taxpayers equally. It regularly conducts audits of businesses to make sure they are complying with the law and takes action when it finds situations of non-compliance.
In addition, if you suspect that a supplier is purposely violating tax laws, you may submit a lead to the Canada Revenue Agency’s Leads Program. You can submit a lead online, by telephone, by mail or by fax. Once you have submitted the information, the CRA will review the information and take the appropriate action to address the specific type of tax violation if it is determined that a tax violation has occurred. The CRA has strict protocols in place for handling lead information. If you submit a lead, you may do so anonymously. Likewise, you will not receive feedback or updates after you submit information. This is because the CRA cannot disclose information about other persons.
You may contact the National Leads Centre by telephone at 1-866-809-6841 and you may find additional information about submitting leads, including the information required to submit a complete lead at www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/suspected-tax-cheating-in-canada-overview.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.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-630-4822.
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,
Batoul Hassan
Senior Rulings Officer
Digital Economy Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate
FOOTNOTES
1. Pursuant to subsection 211.1(1), an Accommodation Platform is defined as a digital platform through which a person facilitates the making of supplies of short-term accommodation situated in Canada by another person that is not registered under Subdivision D of Division V.
2. Under subsection 123(1), a Short-term accommodation is defined as a residential complex or a residential unit that is supplied to a recipient by way of lease, licence or similar arrangement for the purpose of its occupancy by an individual as a place of residence or lodging, if the period throughout which the individual is given continuous occupancy of the complex or unit is less than one month.
3. Under subsection 211.1(1), an Accommodation Platform Operator, in respect of a supply of short-term accommodation made through an accommodation platform, is defined as a person (other than the supplier of the short-term accommodation or an excluded operator) that controls or sets the essential elements of the transaction between the supplier of short-term accommodation and the recipient, or if no such person exists, it would be a person that is involved, directly or through arrangements with third parties, in collecting, receiving or charging the consideration for the supply of short-term accommodation and transmitting all or part of that consideration to said supplier.
4. Conversely, paragraph 6(b) of Part I of Schedule V exempts a supply of a residential unit by way of lease, licence or similar arrangement for the purpose of its occupancy as a place of residence or lodging by an individual, where the consideration for the supply does not exceed $20 for each day of occupancy.
5. Under subsection 211.1(1), a 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.
6. Section 3.3 of this letter provides additional information on the defined term excluded operator.
7. Pursuant to subsection 123(1) a supplier, in respect of a supply, is defined as the person making the supply.
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