30 May 2025 External T.I. 2025-1050201E5 - Part XX Reporting Obligations

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: 1. What is the deadline for a reporting platform operator to comply with the reporting obligations found in section 291, in light of the transitional rule in subsection 288(2), in respect of sellers as described below:

A seller that is already registered on the platform as of the date on which an entity becomes a reporting platform operator (January 1, 2024 or a subsequent date), where the reporting platform operator does not complete the due diligence procedure in sections 283 to 287 in respect of the seller in its first reportable period.

A seller that is already registered on the platform as of the date on which an entity becomes a reporting platform operator (January 1, 2024 or a subsequent date), where the reporting platform operator completes the due diligence procedure in sections 283 to 287 in respect of the seller in its first reportable period.

A seller that registers on the platform after the date on which an entity becomes a reporting platform operator (January 1, 2024 or a subsequent date).

2. Should a platform operator make assumptions based on the data it has regarding the status of a particular seller as a “reportable seller” where the platform operator is aware of the total value of the orders placed on the platform for this seller, but not of the final price paid to the seller? If not, does this imply that even if the platform operator qualifies as a reporting platform operator, it would not be required annual information returns as it would not know if the seller is a reportable seller ?

3. If the answer to question 2 is yes, can it be assumed that the reporting platform operator would only be required to report the following information regarding a reportable seller ?

a) Legal name;
b) Address of registered office;
c) Business number;
d) Jurisdiction(s) of residence for tax purposes at the end of the calendar year,

4. Does an operator qualify as a “platform operator” with respect to sellers, which are not separate legal entities, as the operator does not contract with the sellers (since it is itself) to make all or part of a platform available to them?

Position: 1. a) January 31 of the year following the calendar year in which the seller is identified as a reportable seller; in this case the calendar year corresponds to the second reportable period of the reporting platform operator.

1. b) January 31 of the year following the calendar year in which the seller is identified as a reportable seller; in this case the calendar year is the first reportable period of the reporting platform operator.

1. c) January 31 of the year following the calendar year in which the seller is identified as a reportable seller; in this case the calendar year is the first reportable period of the reporting platform operator.

2. Question of facts.

3. Question of facts.

Reasons: 1. Wording of the Act.

2. Whether the Platform is a “platform” under subsection 282(1) of the Act and whether the “available records” of the reporting platform operator allow to determine that the sellers are “excluded sellers ”are questions of fact.

3.

XXXXXXXXXX							2025-105020
								François Fournier-Gendron

May 30, 2025

Dear XXXXXXXXXX,

Re: Reporting Obligations under Part XX of the Income Tax Act

This letter is in response to your request, dated March 5, 2025, for interpretative assistance regarding the application of Part XX of the Income Tax Act (the “Act”).

Unless otherwise noted, all statutory references herein are references to the Act and its accompanying regulations.

Your request raises two interpretative issues: (i) an inquiry regarding the application of the transitional rule set out in subsection 288(2), and (ii) a request for clarification concerning the reporting obligations under Part XX of the Act in a particular scenario.

Based on the facts and assumptions submitted, the particular scenario can be summarized as follows:

1. A platform operator (the “Operator”), who is also an equipment manufacturer, has developed a proprietary digital platform (the “Platform”) intended to support its network of independent vendors (the “Vendors”). The Vendors list their respective inventory of goods on the Platform for sale to their select customers (“End-Customers”).

2. While there is no formal franchisor/franchisee agreement in place, the operational relationship between the Operator and the Vendors is functionally analogous to such a model.

3. Access to the Platform is restricted to pre-qualified End-Customers who must either request an invitation through their Vendor or be onboarded directly by the Vendor, who may automatically create accounts for their established End-Customers and send them the log-on credentials. The Platform is not available to the general public.

4. The End-Customers are the Vendor’s customers and may be individuals, corporations or other entities.

5. Orders are initiated via the Platform by End-Customers, but once confirmed, the Platform is no longer involved in the transaction and the remaining activities will follow the same process used for the Vendor’s other sales that occur outside the Platform. That is, fulfillment, invoicing (including applicable Canadian sales tax) and payment collection will be handled directly between the Vendor and the End-Customer.

6. The Operator has access to order data captured at the time of transaction initiation (e.g., value of the orders), but has no visibility into subsequent developments such as fulfillment, final sale price or any modification to the order, or the completion of the sale.

7. The Operator also utilizes the Platform for its own purposes as certain Vendors operate under the Operator’s legal entity (“Operator Vendor” or “Operator Vendors”). The way the Operator Vendors use the Platform is similar to that of the Vendors.

8. The Operator does not receive any compensation from the Vendors for their use of the Platform or their orders received through the Platform.

Your questions

Transitional rule in subsection 288(2)

1. What is the deadline for a reporting platform operator to comply with the reporting obligations found in section 291, in light of the transitional rule in subsection 288(2), in respect of sellers as described below:

a) A seller that is already registered on the platform as of the date on which an entity becomes a reporting platform operator (January 1, 2024 or a subsequent date), where the reporting platform operator does not complete the due diligence procedure in sections 283 to 287 in respect of the seller in its first reportable period.

b) A seller that is already registered on the platform as of the date on which an entity becomes a reporting platform operator (January 1, 2024 or a subsequent date), where the reporting platform operator completes the due diligence procedure in sections 283 to 287 in respect of the seller in its first reportable period.

c) A seller that registers on the platform after the date on which an entity becomes a reporting platform operator (January 1, 2024 or a subsequent date).

Reporting obligations in the particular scenario

2. In the context of the scenario described, is the Operator required to make assumptions based on the information to which it has access to determine whether a particular seller qualifies as a “reportable seller” for the purpose of the annual reporting obligation under part XX? Alternatively, where the platform operator lacks sufficient information to make such determination, would this result in the absence of any reporting obligation under part XX in respect of the particular seller?

3. If a platform operator is required to report information in respect of a “reportable seller”, is it reasonable to conclude that, under the scenario described, the reporting obligation would be limited to the following fields of information :

a) Legal name;

b) Address of registered office;

c) Business number; and

d) Jurisdiction(s) of residence for tax purposes at the end of the calendar year.

4. Does the Operator qualify as a “platform operator” in respect to the Operator Vendors, given that the Operator Vendors are not separate legal entities?

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

General comments

On 3 July 2020, the Organisation for Economic Co-operation and Development (the “OECD”) released its “Model Rules for Reporting by Platform Operators with respect to Sellers in the Sharing and Gig Economy” (the “OECD Model Rules”). In general, these rules require digital platform operators to collect information on revenues earned by sellers offering accommodation, transport and personal services through platforms and to report the information to tax authorities. The OECD indicated that it developed these rules to limit the proliferation of different domestic reporting requirements and to facilitate information exchange agreements between interested jurisdictions.

Part XX of the Act implements Canada's version of the OECD Model Rules. These rules affect platform operators which enable sellers to generate income through the sale of goods or provision of services. Platform operators have to collect detailed information on sellers and the information needs to be verified and reported to the Canada Revenue Agency (the “CRA”) annually. The rules took effect on 1 January 2024, with the first reporting due on January 31, 2025 in respect of the 2024 calendar year. As a matter of administrative relief, the CRA will waive penalties and interest on late-filed information returns that were originally due on January 31, 2025, provided those returns are submitted no later than July 31, 2025.

Under subsection 282(2), the provisions in Part XX of the Act must be interpreted consistently with the OECD Model Rules, as amended from time to time, unless the context requires otherwise.

CRA response to question 1

Section 291 outlines the reporting obligations that apply to reporting platform operators (footnote 1) . Subsection 291(1) provides that a reporting platform operator must report to the Minister the information set out in section 292 with respect to a reportable period (footnote 2) no later than January 31 of the year following the calendar year in which a seller is identified as a reportable seller.

A reporting obligation under subsection 291(1) arises with respect to a seller that meets the definition of “reportable seller” in subsection 282(1). The determination of whether a seller is a reportable seller is made pursuant to the due diligence procedures set out in sections 283 to 287. Pursuant to subsection 288(1), a reporting platform operator must complete the due diligence procedures by December 31 of the reportable period.

Subsection 288(2) sets out a transitional relief for an entity that becomes a reporting platform operator for the first time on or after January 1, 2024. In such a case, for a seller that was already registered on the platform as of the date on which the entity becomes a reporting platform operator (hereinafter a “Legacy Seller”), completion of the due diligence procedures may be deferred until December 31 of the reporting platform operator’s second reportable period.

a) Legacy Seller for which the due diligence procedure is not completed in the first reportable period of the reporting platform operator

If, as permitted by subsection 288(2), a reporting platform operator does not complete the due diligence procedure set out in sections 283 to 287 in respect of a Legacy Seller in its first reportable period, the reporting platform operator would be required to do so by December 31 of its second reportable period. Then, the reporting platform operator would have to report to the Minister the information set out in section 292 in respect of a Legacy Seller that is identified as a reportable seller no later than January 31 of the year following the end of the second reportable period.

For example, if an entity became a reporting platform operator on January 1, 2024, it would have to complete the due diligence procedure set out in sections 283 to 287 in respect of a Legacy Seller by December 31, 2025. If the Legacy Seller is identified as a reportable seller, then the reporting platform operator would have to report to the Minister, by January 31, 2026, the information set out in section 292 in respect of the Legacy Seller.

b) Legacy Sellers for which the due diligence procedure is completed in the first reportable period of the reporting platform operator

If, notwithstanding subsection 288(2), a reporting platform operator completes the due diligence procedure set out in sections 283 to 287 in respect of a Legacy Seller in its first reportable period, and determine the Legacy Seller to be a reportable seller, then the reporting platform operator would have to report to the Minister the information set out in section 292 in respect of the Legacy Seller no later than January 31 of the year following the end of the first reportable period.

For example, if an entity that became a reporting platform operator on January 1, 2024 completed the due diligence procedure set out in sections 283 to 287 in respect of a Legacy Seller by December 31, 2024, and identify the Legacy Seller as a reportable seller, then the reporting platform would have to report to the Minister, by January 31, 2025, the information set out in section 292 in respect of the Legacy Seller.

c) Seller that registers on the platform after an entity became a reporting platform operator

If a seller registers on a platform after the date on which an entity becomes a reporting platform operator, the transitional relief in subsection 288(2) would not apply in respect of this seller. Pursuant to subsection 288(1), the reporting platform operator would have to complete the due diligence procedures set out in sections 283 to 287 by December 31 of the reportable period. Then, pursuant to subsection 291(1), the reporting platform operator would have to report to the Minister the information set out in section 292 in respect of a seller that is identified as a reportable seller no later than January 31 of the year following the end of the reportable period.

For example, if an entity became a reporting platform operator on January 1, 2024 and a seller registered on the platform on March 31, 2024, the reporting platform operator would have to complete the due diligence procedure set out in sections 283 to 287 by December 31, 2024. If the seller is identified as a reportable seller, then the reporting platform operator would have to report to the Minister, by January 31, 2025, the information set out in section 292 in respect of the seller.

CRA response to question 2

The reporting obligations in Part XX apply to a platform operator that is a reporting platform operator. There must therefore be a “platform” within the meaning of subsection 282(1) for the reporting obligations to apply. Whether the Platform is a “platform” in the particular scenario submitted is a question of fact. While making this determination is beyond the scope of a technical interpretation, we can offer the following general comments.

According to the definition in subsection 282(1), “platform” means a software, including all or part of a website and applications (including mobile applications), accessible by users and allowing sellers to be connected to other users for the provision of relevant services or the sale of goods, directly or indirectly, to such users (including the collection and payment of consideration in respect of relevant activities (footnote 3) ).

Finance’s explanatory notes add that “[t]he definition of “platform” also encompasses operations to collect consideration from users, with a view to then paying out such consideration to the seller, either partly or wholly prior to, or after the provision of the relevant service.”

The definition of “platform” also excludes certain software that exclusively perform the following functions: the processing of payments in relation to relevant activities; listing or advertising in relation to relevant activities; or redirecting or transferring of users to a platform . Finance’s explanatory notes clarify that:

“The term “platform” does not, however, include software that exclusively facilitates the processing of payments in relation to relevant activities, the mere listing or advertising of relevant activities or the transfer of users to another platform, provided in each case that there is no further intervention in the provision of relevant activities. This is to clarify that pure payment processors, classified ads boards and online aggregators do not meet the definition of “platform”, given that they do not immediately intermediate the linking-up between sellers and other users for the provision of relevant activities and the collection of consideration for the relevant activities.”

If the Platform is a “platform” and the Operator is a “reporting platform operator” within the meaning of subsection 282(1), the next question is whether the reporting platform operator can rely on assumptions to determine if a seller is a reportable seller or an excluded seller (footnote 4) .

Subsection 283(1) provides that a reporting platform operator may rely on its available records in order to determine whether a seller is an excluded seller under paragraph (d) of the definition in subsection 282(1), that is, a seller for which the platform operator solely facilitated fewer than 30 relevant activities for the sale of goods and for which the total amount of consideration paid or credited did not exceed $2,800 during the reportable period.

Under the definition in subsection 282(1), a “consideration” is compensation in any form paid or credited to a seller in connection with relevant activities. The amount of consideration must be known or be reasonably knowable by the platform operator, however, to be treated as consideration for the purposes of this definition. Thus, amounts that are known or reasonably knowable by the reporting platform operator would be treated as consideration for the purpose of paragraph (d) of the definition of “excluded seller” in subsection 282(1).

In document “Model Reporting Rules for Digital Platforms: Frequently Asked Questions [FAQ]”, the OECD indicated that the test to be applied to determine whether the amount of a consideration is reasonably knowable depends on whether the business model of the platform is such that it provides visibility over the consideration to the reporting platform operator (footnote 5) . The OECD further suggested that, under certain circumstances, a reporting platform operator's knowledge of a seller's listed price posted on the platform could render the amount of consideration reasonably knowable for the reporting platform operator (footnote 6) . The OECD also stated that the notion of “reasonably knowable” was introduced to avoid circumvention of the reporting obligations in instances where the information can be readily known by the reporting platform operator (footnote 7)

Whether the available records of a reporting platform operator contain enough information to render the amount of consideration reasonably knowable is ultimately a question of fact. However, we note that if a reporting platform operator knows the total value of orders placed with a seller, this could make the seller’s consideration reasonably knowable to the reporting platform operator, such that the reporting platform operator would be able to determine whether the seller is an “excluded seller” under paragraph (d) of the definition in subsection 282(1).

CRA response to question 3

Generally if a particular seller is determined by a reporting platform operator to be a reportable seller, the CRA expects that the reporting platform operator reports to the Minister all of the information set out in section 292, including the total consideration paid or credited during each quarter of the reportable period.

As mentioned, the amount of consideration must be known or reasonably knowable by the platform operator to be treated as “consideration”. Whether the amount of consideration is known or reasonably knowable by the platform operator is a question of fact. However, we reiterate that if the reporting platform operator knows the total value of orders placed with a seller, this could make the seller’s consideration reasonably knowable to the reporting platform operator.

CRA response to question 4

In our view, where a reporting platform operator also sells goods in its own name directly via its platform, such reporting platform operator is not a “seller” for the purposes of Part XX as it did not register on the platform for the purpose of being connected to platform users for the sale of goods (footnote 8) .

We trust our comments will be of assistance.

Yours truly,

Sophie Larochelle
Section Chief
for Division Director
Specialty Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1 The term “reporting platform operator” is defined in subsection 282(1).

2 Under the definition set out in subsection 282(1), “reportable period” refers to any calendar year during which a platform operator is a reporting platform operator. Accordingly, any calendar year in which a platform operator is a reporting platform operator, for any portion of that year, will constitute a reportable period.

3 The term “relevant activities” is defined in subsection 282(1).

4 The term “excluded seller” is defined in subsection 282(1).

5 See answer to question 3 of the FAQ in Section I: definitions. The FAQ was last updated in October 2023 and can be found at: https://web-archive.oecd.org/2023-10-23/648633-model-reporting-rules-for-digital-platforms-faqs.pdf

6 See answer to question 14b) of the FAQ in Section I: definitions.

7 See answer to question 8 of the FAQ in Section I: definitions.

8 See the OECD interpretative guidance published in June 2021, at page 18:

https://www.oecd.org/content/dam/oecd/en/publications/reports/2021/06/model-reporting-rules-for-digital-platforms_5396003d/8ffb8d09-en.pdf