You need to know how the Goods and Services Tax (GST) or Harmonized Sales Tax (HST) affects people who don’t live in Canada but do business there. This tax is put on most things and services made in Canada. It also applies to real estate and personal property.
If you want to conduct business in Canada, you should be thinking, “Do I need to charge GST/HST to foreign clients?” You probably need some sound guidance on the various sales taxes if you are asking this.
To figure out if you should charge GST to foreign clients, you must first find out where they live.
For Each Person
The following factors are used to determine residency status:
- Your links to Canada;
- How long you’ll be away;
- Your ties to other countries;
- How often do you go to Canada, and how long do you stay?
You live in Canada if you own land, have a spouse, or have children in Canada. For GST reasons, anyone who works for the government and has been sent abroad is also considered a resident.
Entities Other Than Natural Persons
Any entity other than an individual is subject to distinct GST regulations. This includes partnerships, trusts, estates, and corporations. Those who fall under the purview of the Goods and Services Tax are:
- A place to stay for good
- A Canadian corporation is one that was either established or is actively operating in Canada.
- Canadian-based partnerships during the period
- Anyone participating in union operations as a resident
Even if a Canadian citizen or permanent resident would not be deemed a resident under the above criteria, they might be because of the activities they engage in through their permanent establishment. In this context, “permanent establishment” means:
- A permanent location from which they sell their wares, whether they be services, food, or investments.
- A physical location in Canada where someone else sells goods and services on your account.
Do non-Canadian consumers need to pay GST/HST?
If a foreign buyer specifies a Canadian region as the shipping destination, GST regulations specific to that province will apply. You must add GST to the bill if the customer has a GST number.
The services industry operates under these guidelines. Services provided to non-residents and exports of Canadian products are exempt from GST/HST. They are actually taxable, but at 0%, so no additional fees are necessary. Taxes incurred during manufacturing or provision of services can still be offset by claiming input tax rebates.
The law as a whole is simple, but there are numerous special cases. Any work you do in connection with Canadian real estate, for instance, will be subject to taxation. The legislation establishes place-of-supply rules to aid in determining where a supply is deemed to have been made for intangible goods or services. (and, therefore, its tax status).
Verifying that you’re speaking with a genuine foreign national is also crucial. There are a lot of foreign companies that have a sizable presence in Canada and thus might be deemed residents for GST/HST. It’s possible that some of them have even filed tax returns with the Canada Revenue Agency (CRA).
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