CRA indicates that self-assessment where a non-resident supplier has failed to charge HST does not relieve the recipient of the obligation to pay HST to that supplier

Where a non-resident makes a taxable supply of, say, a service to a Canadian registrant and fails to charge GST/HST due, for instance, on the mistaken belief that it was not carrying on business in Canada, the Canadian recipient would typically self-assess itself for GST/HST under ss. 218 and 218.1 if it did not acquire the service exclusively in the course of its commercial activities. If CRA subsequently assessed the non-resident for failure to charge GST/HST on the basis that the place of the supply was in Canada, would CRA not expect the supplier to remit the GST/HST given that the tax had already been paid?

CRA indicated that since the supply in fact was made in Canada, the self-assessment by the recipient was “in error.” The recipient could claim a rebate of such tax under s. 261 within two years after the day the amount was paid provided that the recipient was not assessed for such amount under s. 296. “Where a rebate under section 261 is restricted or is outside the two year period, the recipient may request a (re)assessment of the applicable return for the particular period.”

The fact that the recipient would in many circumstances need to rely on CRA exercising its discretion to assess or reassess its return to reverse the self-assessed tax would be an additional impediment to the non-resident supplier recovering such tax from the recipient.

Neal Armstrong. Summary of 7 April 2022 CBA Roundtable, Q.15 under ETA s. 217 – imported taxable supply.