7 April 2022 CBA Roundtable, Q.15

Where a non-resident makes a taxable supply of, say, a service to a Canadian registrant and mistakenly 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 accept evidence that the recipient self-assessed itself for the GST/HST as satisfying the obligation to remit GST/HST on the supply?

CRA responded:

A recipient of a taxable supply made in Canada by a registrant is not required to self-assess Division IV tax under section 218 or 218.1. If the recipient self-assesses the tax, it has done so in error.

Where a recipient has self-assessed Division IV tax in error, the recipient may be eligible to claim a rebate of the tax, pursuant to section 261, provided the amount was not assessed under section 296. A section 261 rebate for tax paid/remitted in error can be claimed within two years after the day the amount was paid/remitted. 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.

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.”