Does a foreign business need to register for GST/HST?

Which registration applies to you?

Two questions decide it: do you carry on business in Canada, and what do you sell to whom. The provincial sales taxes in Quebec, BC, Saskatchewan and Manitoba are separate and covered further down.

Services and intangible property include digital products, such as streaming, apps and e-books, and traditional services, such as legal or accounting work. Sources: RC4027 and the CRA's digital-economy registration page.

When do the normal GST/HST rules require registration?

When you carry on business in Canada and are not a small supplier. A non-resident that does not carry on business in Canada generally does not have to register under the normal rules, except to sell admissions to events in Canada, to sell goods delivered in Canada to consumers over $30,000 in 12 months, or to solicit Canadian orders for printed publications (RC4027; CRA).

Whether you carry on business in Canada is a question of fact. The CRA looks at where:

• your agents or employees are
• goods are delivered and payment is made
• you buy goods, and hold assets or inventory
• contracts are made
• services are performed
• you have bank accounts or a branch office
• you are listed in directories or advertise

How does the small supplier test work?

You stop being a small supplier when your taxable sales, worldwide and together with your associates', pass $30,000 (CRA):

• In one calendar quarter: charge tax on the sale that takes you over, and register within 29 days.
• Over the last four calendar quarters, but not in one: you stop being a small supplier at the end of the month after that quarter, and must register within 29 days.

A business with worldwide taxable sales over the threshold is not a small supplier, however little it sells in Canada. Sales of financial services, capital property and goodwill are left out.

Non-residents apply through the CRA's Non-Resident Business Registration online form or Form RC1 (CRA).

Can you register if you don't have to?

In some cases. A non-resident that does not carry on business in Canada can register voluntarily if, for example, it regularly solicits orders for goods to be delivered to Canada, or agrees to supply services performed in Canada or intangible property used in Canada. Registration lets you claim input tax credits for GST/HST you pay on business purchases, but you must then charge, collect and remit GST/HST on your taxable sales in Canada and file returns. You generally must stay registered for at least a year (RC4027).

Do you have to give the CRA a security deposit?

Usually, if you register under the normal rules and have no permanent establishment (a fixed place of business, such as an office or branch) in Canada, or sell in Canada only through another person's fixed place of business (RC4027).

• Amount: 50% of your estimated net tax for the first 12 months, then of your actual net tax for the previous 12 months.
• Limits: at least $5,000, at most $1,000,000.
• No deposit if you expect taxable sales in Canada of no more than $100,000 a year and net tax between $3,000 owing and $3,000 refundable.

Simplified registrants give no deposit.

When is simplified registration required?

When all of these apply (Excise Tax Act, s. 211.12; CRA):

• You don't carry on business in Canada and are not registered under the normal rules.
• You sell taxable services or intangible property to buyers whose usual home is in Canada and who have not shown you they are registered for GST/HST.
• Those sales, not counting zero-rated sales or sales through a registered platform, pass $30,000, or can reasonably be expected to, in any 12-month period.

There is no grace period. Apply by the day your sales pass, or are expected to pass, the threshold, using the CRA's simplified online registration, not Form RC1 (Excise Tax Act, s. 211.12(3); CRA).

What changes once you register (CRA):

• You charge GST or HST at the rate for the customer's province.
• You cannot claim input tax credits.
• You show customers the GST/HST charged, or say it is included in the price, on receipts, invoices or contracts (CRA).
• A registered business you charge by mistake cannot claim that tax back from the CRA. It must ask you for a refund.
• You file quarterly, due one month after each calendar quarter ends.
• You can apply to file and pay in US dollars or euros.
• You cannot be registered under both systems. If you meet the voluntary registration conditions above, you may apply for normal registration instead. It allows input tax credits, but you may owe the security deposit and must charge GST/HST on sales to registered businesses too (CRA).

Do sales to businesses count?

Not if the business gives you its GST/HST registration number. The CRA says you then don't have to charge the tax. The buyer is not a "specified Canadian recipient", so the sale stays out of the threshold (CRA). A business that gives no number is treated like a consumer.

What if your goods sit in a Canadian warehouse?

If you don't carry on business in Canada, the goods rule applies, and it uses normal registration only. Inventory in Canada is one of the factors in whether you carry on business here, so check that first. If you do, the small supplier test applies instead. Goods delivered or made available to a buyer in Canada count, such as goods in a fulfillment warehouse or shipped from a place in Canada. Once those sales to consumers pass $30,000 in 12 months, you must apply for normal registration within 29 days, and the security deposit may apply (CRA; Excise Tax Act, s. 240(2.1)).

Sales through a registered platform don't count. The platform charges the tax on them. Goods mailed or couriered from outside Canada are not covered by this rule (CRA).

Which rate do you charge?

The rate of the province where the sale is made under the place-of-supply rules. Goods are taxed where they are delivered. For services and intangible property sold to consumers, you use the customer's usual place of residence, based on indicators such as home or billing address, IP address and payment details (CRA).

Rates from the CRA rate table.

Do Quebec, BC, Saskatchewan or Manitoba need their own registration?

They can. Each runs its own sales tax alongside GST, with its own rules for sellers outside the province. A GST/HST registration does not cover them.

In all four provinces, sales made through a platform that collects the provincial tax generally need no registration of your own. In Quebec they are left out of the threshold. Sales through your own website still count. In BC, you stay jointly liable if the platform fails to collect (PST 142; RST 064).

What about goods you ship into Canada?

The Canada Border Services Agency generally collects GST on goods imported into Canada at the time of import, along with any duty. Some low-value shipments are exempt (CBSA). On goods a consumer imports into an HST province, it collects the full HST. The importer of record (the business or person named as importing the goods) pays it, separately from any registration (CBSA; CRA).

Example

A US software company has no office, staff, servers or contracts in Canada. Assume it does not carry on business in Canada. It sells monthly subscriptions online. Its Canadian sales over the last 12 months, in Canadian dollars:

1. Only the $38,000 to individuals counts toward the simplified threshold. It passes $30,000, so the company must register under the simplified system.
2. It charges HST at 13% to a subscriber in Ontario and GST at 5% to one in Alberta. It charges no GST/HST to the businesses that gave their numbers.
3. It claims no input tax credits, files quarterly, and may apply to file in US dollars.
4. Of the $38,000, $9,000 came from Quebec. That is under $30,000, so no QST registration yet. None of its business customers are in Quebec; one that gave no QST number with TQ would count too.
5. BC customers, individuals and businesses together, paid $14,000. That passes BC's $10,000 for software, so it must register for BC PST.
6. It also has customers in Saskatchewan and Manitoba. Both tax software as a service, so it checks their registration rules too.

Different for you?

• You have staff, agents, an office, inventory or signed contracts in Canada. You may be carrying on business in Canada, which brings the normal GST/HST rules and can bring Canadian income tax. Provincial rules change too: in BC, staff, agents, an office or management anywhere in Canada put you under the rules for Canadian sellers, which can require PST registration with no threshold (PST 001). See cross-border tax.
• You live in Canada and run a US company. See US business for a Canadian resident.
• You are a Canadian who owns a US LLC. See Canadian owner of a US LLC.