Tax & Trade Blog

---

GST 101: CARRYING ON A BUSINESS IN CANADA

GST REGISTRATION RULES FOR NON-RESIDENTS OF CANADA

This Report is another in our series of GST 101 Series Reports.  Each Report in this series focusses on an aspect of GST/HST that is part of the "building blocks" of the system.

In this Report, we focus on the “carrying on business in Canada” requirement, which is particularly relevant for determining the GST/HST Registration requirements for non-residents of Canada. 

Background on GST Registration for Non-Residents

In general, non-residents who carries on business in Canada may have to register for GST/HST if the non-resident makes a taxable supply in Canada (provided that other certain requirements are met), pursuant to ETA 240(1).

---

GST 101: RESIDENT VS. NON-RESIDENT

GST REGISTRATION DEPENDS ON RESIDENCY

This is the second in our series of "GST 101 Reports", written with a view to educating our readers on the basics of Canada's GST/HST system, and building towards more in-depth discussions to come.

This Report deals with the concept of "Residency" which is a bedrock issue when determining whether businesses are required to be registered for Canada's GST/HST System.

Why is Residency Relevant?  (Special Non-Resident Rule)

A taxpayer who ceases to be GST/HST registrant can be hit with a hefty tax bill due to subsection 171(3) of the Excise Tax Act (the “ETA”), which in effect triggers a deemed disposition, which with other provisions in the ETA, forces the person ceasing to be a registrant to self-assess GST/HST on the fair market value of any remaining property.

This is an often over-looked consequence of the wind-up of commercial activities, and is aimed at putting such a business on the same footing as any other person acquiring property for non-commercial activities: to effectively have acquired that property on a fully GST/HST paid basis.

A recent case illustrates this concept, as well as the trouble that can come with pre-mature cancellation of one’s GST/HST registration number (which does not necessarily equate to ceasing to be a “registrant”).

The CRA has a mandate to improve compliance of GST/HST registrants and to encourage GST/HST registrants to meet their filing requirements.  As part of its commitment to this mandate, the CRA will be implementing changes to its current processes.

Non-residents carrying on business in Canada must be cognizant of the potential to be involuntary registered for the GST/HST. 

Subsections 241(1.3) to (1.5) of the ETA (which came into effect in June 2014) empower the CRA to unilaterally register a person who has not registered for GST/HST but, in the CRA’s view, is required to do so. The budget states that these amendments will strengthen GST/HST registration compliance and help the CRA to combat the underground economy.