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
Place de Ville, Tower A, 5th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 222896
Business Number: […]
Attention: [Client]
Dear [Client] :
Subject: GST/HST INTERPRETATION
Tax status of online training program
Thank you for your letter of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the online training program provided by […][NRCo]. We apologize for the delay in this response.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia 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.
STATEMENT OF FACTS
Based on the information provided in your letter of [mm/dd/yyyy], […] (the Website), and our telephone conversations of [mm/dd/yyyy], we understand the following:
1. [NRCo] is a non-resident located […][outside of Canada].
2. [NRCo] provides a professional development training program (Program) for […] [Professionals] in touch and trauma recovery work. […][Owner 1] and […][Owner 2] are the co-owners of [NRCo].
3. [NRCo] is registered for GST/HST purposes effective [mm/dd/yyyy] under the above noted business number.
4. You indicated that [NRCo] does not have significant presence in Canada and confirmed the following:
- [NRCo]’s agents or employees are located [outside of Canada] and there are no offices in Canada;
- [NRCo] has no bank account in Canada;
- [NRCo] is not listed in any business directory in Canada and the transactions are solicited globally through its Website and by word of mouth;
- [NRCo] does not engage in any other activities in Canada;
- The Website is hosted on a server located [outside of Canada];
- [NRCo] advertises the trainings through its Website with marketing intended for various markets including the Canadian market;
- The participants pay online […].
- The payments are deposited into [NRCo]’s bank account; and
- All services are performed outside Canada.
5. During our telephone conversation of [mm/dd/yyyy] , you clarified that [NRCo] is not a “vocational school” and that the Program is intended for professional development purposes.
6. Initially, [NRCo] intended to offer the Program in-person in […][province X] and […][province Y] in 2020. However, due to the COVID-19 pandemic, [NRCo] had to cancel all of the trainings in-person and began to offer the Program to the participants online […]. The total revenues from supplies of the Program to Canadian participants (unregistered GST/HST recipients) are expected to exceed $30,000 CAD for the 12-month period beginning on July 01, 2021.
7. The Program is described as follows on the Website:
[…][Description of the Program]
- The Program was co-created and is taught by [Owner 1] and [Owner 2]
- The Program will be taught through an online hybrid format consisting of a combination of lectures/demonstrations and experiential practice of the specific somatic techniques presented.
- The Program consists of three modules and needs to be completed in order.
- Tuition is $[…] per module.
- The Program has recommended prerequisites.
8. Prospective participants register for the Program through the website.
9. The Program is delivered online in the following format:
- Video lectures and demos are pre-recorded and available on the website [#] days before each module start date so that the participants can watch prior to [...][X]. The videos remain live for review [#] days following [X].
- Questions & Answers (Q&A) session for the class where the participants can ask questions and problem solving […].
- A [#]-day real-time [X] [...]. During [X], there will be live demonstrations of the work as well as opportunity for the participants to practice various somatic techniques. The participants also have the opportunity to share their experiences and ask questions.
- To complete the Program, participants must attend [#] days of [X] during real-time [...].
10. As the Program is conducted virtually, it is available to participants from all around the world.
11. After completion of each module of the Program, participants are provided with a certificate which is used for professional development purposes and can be used as continuing education credits. There is no pass or fail element in order for a participant to receive a certificate.
12. […].
RULING REQUESTED
You would like to know whether the supplies of the online Program by [NRCo]are subject to 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
Generally, all supplies made in Canada are taxable unless specifically identified as exempt in Schedule V. Exempt supplies are not subject to GST/HST. Taxable supplies are supplies that are made in the course of commercial activities and may be taxable at the rate of 15%, 13%, 5% or 0% (zero-rated supplies). Zero-rated supplies are specifically identified in Schedule VI.
A GST/HST registrant is generally required to collect GST/HST on the person's taxable supplies that are not zero-rated. Where a taxable supply, other than a zero-rated supply, is made or deemed to be made in Canada, it is subject to the GST at 5% when it is deemed to be made in a non-participating province, and subject to the HST at the applicable rate when it is deemed to be made in a participating province.
Characterization of the supply
In order to determine the tax status of the supply, it is necessary to determine whether the supply is one of intangible personal property (IPP) or a service. The characterization of supplies is fundamental to the application of the GST/HST, as it affects the place where a supply is considered to be made, the tax rate that applies to a supply, the manner in which tax is collected, and the timing of liability for tax in respect of a supply. Supplies made by electronic means (including digitized products) are considered to be either an IPP or a service.
In determining whether a particular supply made by electronic means is a supply of IPP or a supply of a service, the Canada Revenue Agency (CRA) will consider a number of factors such as the nature of the agreement between the supplier and the customer, and whether the agreement is in substance for work (or work and materials), or for property (including a right or interest of any kind).
Factors that generally indicate that a supply made by electronic means is one of IPP are:
- a right in a product or a right to use a product for personal or commercial purposes is provided, such as:
• intellectual property or a right to use intellectual property (e.g., a copyright), or
• rights of a temporary nature (e.g., a right to view, access or use a product while on-line);
- a product is provided that has already been created or developed, or is already in existence;
- a product is created or developed for a specific customer, but the supplier retains ownership of the product; and
- a right to make a copy of a digitized product is provided.
Factors that generally indicate that a supply made by electronic means is a service are:
- the supply does not include the provision of rights (e.g., technical know-how), or if there is a provision of rights, the rights are incidental to the supply;
- the supply involves specific work that is performed by a person for a specific customer; and
- there is human involvement in making the supply.
Based on the information provided, the Program consists of two fundamental elements:
- a right to access the pre-recorded lectures/videos online to review on their schedule which on its own is generally considered as a supply of IPP; and
- a real-time [#-day] [X] and a Q&A session [...] that is generally considered to be a supply of services. These sessions are led by [Owner 1]and [Owner 2] where they will demonstrate the use of somatic techniques for supporting and restoring clients’ resilience and self regulation and provide support, feedback and guidance to the participants. During the [X] and Q&A sessions, the participants have the opportunity to practice various interventions and ask questions and problem solving. The participants are required to attend the [X] session entirely to complete the Program.
For further information on characterizing supplies made by electronic means, please refer to GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of supply rules for determining whether a supply is made in a province.
Single and Multiple Supplies
Where a transaction is comprised of more than one element (for example, live training sessions and access to pre-recorded videos) made by a person, it is necessary to determine whether a single supply is being made or a series of separate (multiple) supplies are being made. Whether the supply of property and services are considered to be a single supply or multiple supplies under an agreement is a question of fact.
If it is determined that a single supply is being provided by a person, then the tax status will generally be based on the provisions of the ETA that pertain to the predominant element of the supply. If it is determined that multiple supplies are being provided by a person, it is necessary to determine if any of the elements are incidental supplies.
Incidental supplies are deemed to form part of another supply, provided that they are supplied together for a single consideration, where it may be reasonably regarded that the provision of one property or service is incidental to the provision of the other property or service.
Alternatively, multiple supplies occur when one or more of the elements can sensibly or realistically be broken out, for example, where a particular element is optional and/or may be acquired separately. In the case of multiple supplies, where the supplies are not considered incidental to another, the tax status of each element would have to be considered separately.
It is our view that the Program is comprised of a supply of IPP (a right to access the pre-recorded videos such as lectures and demos) and of services (Q&A and [X] sessions) supplied together and should be considered as a single supply of providing a training program. The principal supply is one of services. The Program focuses on the demonstration and the experiential practice of the specific somatic techniques presented as the participants are given the opportunity to practice these techniques during the Q&A and [X] sessions. Further, the participants must attend the [X] session to complete the Program. The element that is not a service but IPP such as the right to access the pre-recorded lectures and demos cannot be viewed as satisfying the recipient’s needs on its own and cannot realistically be omitted from the principal supply. That IPP element is so dominated by the service element that it loses any separate identity for fiscal purposes. Additionally, that IPP element is part of the Program and it cannot be regarded as being sufficiently coherent to be treated as separate supplies. As such, the tax status of the Program will be based on the provisions of the ETA that pertain to the predominant element of the supply of services
For further information, you may refer to GST/HST Policy Statements P-077R2, Single and Multiple Supplies, P-159R-1, Meaning of the Phrase Reasonably Regarded as Incidental, and P-160R, Meaning of the Phrase - Where a Particular Property or Service is Supplied Together with any Other Property or Service.
Place of supply – Services
For purposes of the GST/HST, the general rules for determining whether a supply is made in or outside Canada are set out in section 142. Generally, the GST/HST applies only to a supply made or deemed to be made in Canada. A supply made or deemed to be made outside Canada is not subject to the GST/HST.
With respect to a supply of a service, paragraph 142(1)(g) of the ETA provides that a supply of a service is deemed to be made in Canada if the service is, or is to be, performed in whole or in part in Canada. Conversely, paragraph 142(2)(g) of the ETA deems a supply of a service to be made outside Canada if the service is, or is to be, performed wholly outside Canada.
Based on the information provided, the Program was intended to be delivered in-person in [province X] and [province Y] in 2020. However, due to the COVID-19 pandemic, [NRCo] began to offer the Program online […]. The online Program is administered by the instructors, […][Owner 1] and […][Owner 2], where they are conducting their teachings from [outside of Canada]. As the services are wholly performed outside Canada, supply of the Program is deemed to be made outside Canada. Therefore, a supply made or deemed to be made outside Canada is not subject to the GST/HST.
For further information concerning supplies of a service deemed to be made in Canada or outside Canada, please refer to GST/HST Memorandum 3.3, Place of Supply.
Registration (regular GST/HST registration regime)
Under subsection 240(1), every person (including a corporation) who makes a taxable supply in Canada, in the course of a commercial activity engaged in by the person in Canada, is generally required to be registered for GST/HST purposes, with certain exceptions. One exception arises where the person is a non-resident (that is, not resident in Canada) who does not carry on any business in Canada.
In general, a non-resident person must have a significant presence in Canada to be considered to be carrying on business in Canada. Whether a person is carrying on business in Canada for GST/HST purposes is a question of fact requiring consideration of all relevant facts. The factors that the CRA considers in determining whether a person is carrying on business in Canada for GST/HST purposes are set out in GST/HST Policy Statement P-051R2, Carrying on Business in Canada.
Nonetheless, subsection 240(3), in part, permits a non-resident person that is not required to be registered under subsection 240(1) to register for GST/HST purposes. The non-resident person must be a person who in the ordinary course of carrying on business outside Canada regularly solicits orders for the supply by the person of TPP for export to, or delivery in, Canada or has entered into an agreement for the supply by the person of services to be performed in Canada, or has entered into an agreement for the supply of IPP to be used in Canada.
Where [NRCo] is a non-resident for GST/HST purposes and, in the ordinary course of carrying on a business outside Canada, has entered into an agreement to supply taxable services that would be performed during workshops in Canada in 2020, [NRCo] would be entitled to voluntarily register for GST/HST purposes. [However, if] […][NRCo] was […] [not supplying] in-person workshops in Canada […] [NRCo] would no longer qualify for voluntary registration and the registration may be cancelled.
Cancelling registration
Under subsection 242(1), the Minister may cancel a person’s registration provided the CRA is satisfied that the registration is not required under section 240 for GST/HST purposes. If a non-resident person ceases to be engaged in a commercial activity in Canada or no longer qualifies for voluntary registration, the registration may be cancelled.
You may request to cancel the GST/HST registration with the Minister in the prescribed form and manner, containing the prescribed information. An application can be made by using form RC145, Request to Close Business Number Program Accounts, which is available electronically from the CRA website. Alternatively, the person may apply for cancellation of registration by telephone or in writing as long as all necessary information is received, including the reason for the cancellation request, and the effective dates of registration and cancellation. Please refer to GST/HST Memorandum 2.7, Cancellation of Registration, for information on how to cancel the corporation's regular GST/HST registration.
New GST/HST digital economy measures (post June 30, 2021 period)
Requirement to register
Notwithstanding the above and effective July 01, 2021, subsection 211.12 (2) provides that non-resident suppliers who are not registered and are not carrying on business in Canada (specified non-resident supplier) who make taxable supplies of IPP or a service (specified supply) to recipients in Canada that did not provide the supplier with a proof of their GST/HST registration (specified Canadian recipient) are required to register under the simplified GST/HST registration regime, and to collect the GST/HST on these supplies.
A specified non-resident supplier is defined in subsection 211.1(1) to mean, a non-resident person that does not make supplies in the course of carrying on a business in Canada and that is not registered under Subdivision D of Division V of Part IX of the ETA (i.e., the regular GST/HST registration (Footnote 1) ).
Furthermore and pursuant to subsection 211.1(1), a specified supply is defined as a taxable supply of intangible personal property (Footnote 2) or a service other than:
(a) a supply of intangible personal property that
(i) may not be used in Canada,
(ii) relates to real property situated outside of Canada, or
(iii) relates to tangible personal property ordinarily situated outside of Canada;
(b) a supply of a service that
(i) may only be consumed or used outside of Canada,
(ii) is in relation to real property situated outside of Canada, or
(iii) is rendered in connection with criminal, civil or administrative litigation (other than a service rendered before the commencement of such litigation) that is under the jurisdiction of a court or other tribunal established under the laws of a country other than Canada or that is in the nature of an appeal from a decision of a court or other tribunal established under the laws of a country other than Canada;
(c) a supply of a service that is deemed under subsection 180.1(2) to have been made outside Canada;
(d) a supply of a service
(i) made to a person in connection with a supply of short-term accommodation made to the person, and
(ii) the consideration for which represents a booking fee, administration fee or other similar charge; and
(e) a prescribed supply (currently, no supplies have been prescribed).
Under subsection 211.1(1), a specified Canadian recipient means a recipient of a supply where the recipient has not provided to the supplier evidence satisfactory to the Minister of National Revenue of being registered for the GST/HST under Subdivision D of Division V of Part IX of the ETA (i.e., the regular GST/HST registration) and the usual place of residence of the recipient is situated in Canada.
The requirement for specified non-resident suppliers to register under the simplified GST/HST registration regime is based on whether their threshold amounts for any period of 12 months, determined under subsection 211.12(1), exceed $30,000. The threshold amount is generally the sales of specified supplies made to specified Canadian recipients by specified non-resident suppliers.
In this case, as [NRCo] is not entitled to voluntarily register under subsection 240(3), [NRCo] may cancel its registration under the regular GST/HST registration regime. If [NRCo] cancels its regular GST/HST registration, [NRCo] would be required to register under the new simplified GST/HST registration regime in accordance with subsection 211.12 (2) as [NRCo] is considered a specified non-resident supplier making specified supplies to specified Canadian recipients as those terms are defined in subsection 211.1(1). [NRCo] would be considered a specified non-resident supplier who is not registered (once cancelled) under the regular GST/HST registration regime and is not carrying on business in Canada. Further, [NRCo] is making supplies of a service of instructing to Canadian consumers who are not registered under the regular GST/HST registration regime. You also indicated that the revenues from online Program supplied to non-registered Canadian recipients are expected to exceed $30,000 CAD for the 12-month period beginning on July 01, 2021. Therefore, [NRCo] would be required under subsection 211.12(2) to be registered under the simplified GST/HST registration regime and account of tax on its sales to specified Canadian recipients.
Effect of registration
Special place of supply rules
Where a person is registered under the simplified GST/HST registration regime, specified supplies made to specified Canadian recipients are deemed to be made in Canada in accordance with subsection 211.14(1). As a result, such suppliers are required to account for tax on such supplies made to such specified Canadian recipients in accordance with sections 165 and 221.
Non-resident suppliers registered under the simplified GST/HST registration regime (specified non-resident suppliers) would be required to collect and remit the GST/HST only on the supply of IPP or services (specified supply) made to specified Canadian recipients. A specified Canadian recipient includes a Canadian consumer or a Canadian entity who is not registered under the regular GST/HST registration regime. Furthermore and pursuant to the definition found in subsection 211.1(1), a specified Canadian recipient is a recipient of a supply who:
(a) has not provided to the supplier satisfactory evidence that the recipient is registered under the regular GST/HST registration regime; and
(b) has a usual place of residence that is situated in Canada.
Conversely, non-resident suppliers would not be required to collect and remit the GST/HST on their supplies of IPP or services to a person that is registered for the GST/HST under the regular GST/HST registration regime. Non-resident suppliers would rely on the GST/HST registration number of the recipient as proof of its registration status.
For more information on confirming a GST/HST account number of the recipient, please visit our website by following this link:
https://www.canada.ca/en/revenue-agency/services/e-services/e-services-businesses/confirming-a-gst-hst-account-number.html
If the registered recipient provides its regular GST/HST registration number and the GST/HST is still charged and collected, the recipient is able to request a refund from the non-resident supplier. Any GST/HST paid by the registered recipient in such cases is not recoverable by claiming an input tax credit or by filing a rebate application for an amount paid as tax paid in error.
Generally, taxable supplies that are made in Canada are subject to the GST at a rate of 5%, or the HST at the harmonized rate if they are made in a participating province. The rate of tax to be collected on the specified supplies is generally based on the usual place of residence of the recipient in Canada and in a participating province in accordance with subsections 211.14(1) and (3) and section 211.11.
For purposes of determining the usual place of residence of a recipient in paragraph (b) of the definition of specified Canadian recipient and in paragraph 211.14(3)(a), section 211.11 provides a set of rules and indicators to establish if the usual place of residence of that recipient is in Canada and subsequently in a province.
For the purposes of Subdivision E of Division II of Part IX of the ETA (Footnote 3) , subsection 211.11(1) specifies the indicators that may be used for the purposes of determining the usual place of residence of a recipient of a supply. These residence indicators are the following:
(a) the home address of the recipient;
(b) the business address of the recipient;
(c) the billing address of the recipient;
(d) the Internet Protocol address of the device used by the recipient or similar data obtained through a geolocation method;
(e) payment-related information in respect of the recipient or other information used by the payment system;
(f) the information from a subscriber identity module, or other similar module, used by the recipient;
(g) the place at which a landline communication service is supplied to the recipient; and
(h) any other relevant information that the Minister of National Revenue may specify.
Generally, a recipient’s usual place of residence would be considered to be in Canada when two or more of these indicators identify Canada as the recipient’s normal location or residence. In accordance with subsection 211.11(3), the usual place of residence of the recipient of a supply is situated in Canada if the supplier in respect of the supply has:
(a) in the ordinary course of their operations, obtained two or more Canadian indicators in respect of the recipient and has not obtained more than one foreign indicator in respect of the recipient;
(b) in the ordinary course of their operations, obtained two or more Canadian indicators in respect of the recipient and two or more foreign indicators in respect of the recipient, but the Canadian indicators are, in the circumstances, reasonably considered to be more reliable in determining a place of residence; or
(c) if neither of the above situations apply, determined that the usual place of residence of the recipient is situated in Canada based on any method that the Minister of National Revenue may allow.
Subsection 211.11(2) provides that an indicator obtained in connection with a supply is classified for the purposes of section 211.11 as:
(a) a Canadian indicator in respect of the recipient of the supply if the indicator reasonably supports the conclusion that the usual place of residence of the recipient is situated in Canada;
(b) a foreign indicator in respect of the recipient of the supply if the indicator reasonably supports the conclusion that the usual place of residence of the recipient is situated outside Canada;
(c) a participating province indicator in respect of the recipient of the supply if the indicator reasonably supports the conclusion that the usual place of residence of the recipient is situated in a participating province; and
(d) a non-participating province indicator in respect of the recipient of the supply if the indicator reasonably supports the conclusion that the usual place of residence of the recipient is situated in a non-participating province.
The following example could illustrate the above concepts. In the ordinary course of its operations, a supplier of a specified supply (e.g., service) obtains from the recipient a billing address, a home address, payment-related information, and the Internet Protocol address of the device used by the recipient when the service is purchased. The billing address, home address, and payment-related information reasonably indicate a geographic location in Ontario, Canada. The Internet Protocol address reasonably indicates a geographic location […][outside of Canada]. The supplier does not obtain any other information about the recipient in connection with the supply, including any evidence that the recipient is registered for the GST/HST under the regular GST/HST regime.
Pursuant to paragraph 211.11(3)(a), the usual place of residence of the recipient of this specified supply (e.g., service) is considered to be situated in Canada since, in the ordinary course of its operations, the supplier has obtained three Canadian indicators (i.e., billing address, home address, and payment-related information) in respect of the recipient and has not obtained more than one foreign indicator (i.e., Internet Protocol address) in respect of the recipient. Consequently, that recipient is considered a specified Canadian recipient for the purposes of that definition found in subsection 211.1(1).
Once [NRCo] has determined, pursuant to subsection 211.14(1), that a specified supply (i.e., the supply of a service) has been made in Canada to specified Canadian recipients according to the elements discussed above (Footnote 4) , it is then necessary to subsequently determine whether the usual place of residence of the recipient is in a participating province (i.e, Ontario, New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island). Under subsection 211.11(4), if the supplier in respect of a supply has obtained in the ordinary course of their operations one or more addresses that are a home or business address of the recipient of the supply in a participating province and has not obtained in the ordinary course of their operations the same number or a greater number of addresses that are a home or business address of the recipient in a non-participating province, then the usual place of residence of the recipient is to be determined to be in the participating province according to one of the following two rules:
(a) if those addresses of the recipient that are in a participating province are all in the same participating province, then the usual place of residence of the recipient is determined to be in that participating province; and
(b) if those addresses of the recipient that are in a participating province are in two or more participating provinces and if the tax rates for those participating provinces are the same, then the usual place of residence of the recipient is determined to be in the participating province among those participating provinces that has the largest population.
If the usual place of residence of the recipient of a supply is not determined under subsection 211.11(4) to be in a participating province, subsection 211.11(5) provides that where the supplier in respect of the supply has obtained in the ordinary course of their operations one or more participating province indicators in respect of the recipient and has not obtained in the ordinary course of their operations the same number or a greater number of non-participating province indicators in respect of the recipient that could reasonably be considered to be as reliable in determining a place of residence as those participating province indicators, the usual place of residence of the recipient is determined to be situated in the following participating province:
(a) where those participating province indicators are all in respect of the same participating province, that participating province;
(b) where those participating province indicators are in respect of two or more participating provinces and the participating province indicators in respect of one of those participating provinces are, in the circumstances, reasonably considered to be more reliable in determining a place of residence, that participating province;
(c) where the previous two situations do not apply and the supplier has determined that the usual place of residence of the recipient is situated in one of the participating provinces based on any method that the Minister of National Revenue may allow, that participating province; or
(d) where the previous three situations do not apply, and if those participating province indicators are in respect of two or more participating provinces, the participating province among those participating provinces for which the tax rate is the lowest or, if the tax rates for those participating provinces are the same, the participating province among those participating provinces that has the largest population.
If the usual place of residence of the recipient of a supply is situated in Canada but is not determined under subsection 211.11(4) or 211.11(5) to be in a participating province then, under subsection 211.11(6), if the supplier in respect of the supply has determined that the usual place of residence of the recipient is situated in a participating province based on any method that the Minister of National Revenue may allow, then the usual place of residence of the recipient is situated in that participating province.
Using the above example and pursuant to paragraph 211.11(4)(a), since the supplier has obtained one or more addresses that are a home or business address of the recipient in a participating province (i.e., the Ontario home address of the recipient was obtained) with no other home or business addresses obtained from the recipient, the recipient is considered to have a usual place of residence that is in the participating province of Ontario, Canada and to have made that specified supply in that participating province of Ontario pursuant to paragraph 211.14(3)(a). Therefore, in accordance with subsections 165(1) and (2) and 221(1), the supplier is required to charge and collect GST/HST at the combined rate of 13% in respect of the supply of a service since it is made in the participating province of Ontario pursuant to paragraph 211.14(3)(a).
Exception regime - certain provisions of the ETA are not applicable
For GST/HST purposes, subsection 211.1(2) provides that any references to registration in Part IX (i.e, registration under the regular GST/HST registration regime), does not include registration under the simplified GST/HST registration regime. As such, certain GST/HST provisions applicable to a person under the regular regime are not applicable to a person registered under the simplified regime.
In accordance with paragraph 240(6)(c), the requirement to post security applies to a person who applies or is required to be registered under Part IX. Entitlement to an input tax credit (ITC) in section 169 is limited to a person who is a registrant. A registrant is defined in subsection 123(1) as a person who is registered or required to be registered under Subdivision D of Division V. Therefore, subsection 240(6) and section 169 do not apply to a person who is registered under the simplified GST/HST registration regime. Hence, a person registered under the simplified GST/HST registration regime would not be required to post security and would not be entitled to claim ITCs if they paid GST/HST on purchases.
A person registered under the simplified GST/HST registration regime is required under section 221 and 225 to collect and remit the tax. Section 211.16 provides that the person is required to indicate to the recipient, in a manner satisfactory to the Minister, the consideration paid or payable by the recipient and the tax payable in respect of the supply, or that the amount paid or payable by the recipient for the supply includes the tax payable in respect of the supply.
Supplemental reference material
Additional information regarding your GST/HST obligations under the new digital economy measures may be found on the CRA’s website at https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/digital-economy.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 Canada Revenue Agency (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 905-706-8742. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Teresa Lau
Senior Rulings Officer
Digital Economy Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate
FOOTNOTES
1 Also referred to in our CRA webpages as “normal GST/HST registration”
2 Also referred to in our CRA webpages as “digital product”
3 New GST/HST digital economy measures applicable as of July 01, 2021
4 Pursuant to the definition specified Canadian recipient found under subsection 211.1(1), these elements are:
- the GST/HST registration status of the recipient; and
- the usual place of residence of the recipient is situated in Canada.
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