Alvarez & Marsal Clarifies Canadian Sales Tax Obligations for Non-Residents
Alvarez & Marsal has released guidance addressing the complexities of Canadian sales tax obligations for non-resident businesses selling into the country. The advice covers both federal and provincial tax regimes.
Consulting firm Alvarez & Marsal has released guidance to clarify Canada's complex sales tax obligations for non-resident businesses operating within the country. Canada's sales tax system comprises five distinct regimes, and the rules for registration, collection, and remittance can differ significantly for non-residents compared to domestic businesses.
The guidance highlights the federal Goods and Services Tax/Harmonized Sales Tax (GST/HST), applicable to all supplies of property or services made in Canada. Non-resident rules generally require GST/HST registration, collection, and remittance if a business is "carrying on business" in Canada. This determination is typically based on a "significant presence," assessed through factors such as the location of agents or employees, place of delivery, and where contracts are made.
Specific rules for the digital economy have been expanded since July 1, 2021. These regulations mandate that many non-resident businesses, even without a physical presence in Canada, must register for and collect GST/HST if their annual revenue from supplying services and intangible property to unregistered Canadians exceeds CAD 30,000. This applies to sales of digital services and products, among others.
The advisory also addresses provincial sales taxes, such as Quebec Sales Tax (QST) and British Columbia Provincial Sales Tax (BC PST). Quebec's rules largely mirror federal legislation. As of April 1, 2021, BC PST registration is generally required for businesses outside British Columbia whose sales to residents within the province exceed CAD 10,000 annually. Alvarez & Marsal advises non-resident businesses to carefully assess their obligations and seek professional advice.