In general, a non-resident corporation is not required to register for GST/HST in Canada unless it makes taxable supplies of goods or services in the course of a business carried on in Canada.
The word “business” is defined in the GST/HST rules to include “a profession, calling, trade, manufacture, or undertaking of any kind whatever, whether the activity or undertaking is engaged in for profit, and any activity engaged in on a regular or continuous basis that involves the supply of property by way of lease, licence or similar arrangement …”.
The phrase “undertaking of any kind whatever” is intended to capture activities that constitute neither a profession, calling, trade, nor manufacture. The Canada Revenue Agency’s (“CRA”) view is that an activity has to be sufficiently business-like to qualify as an undertaking.1 Also, the definition of “business” includes activities undertaken without a profit motive, which is different from the definition at common law where a reasonable expectation of profit must be present.
Having established that the non-resident corporation carries on a business, the next step is to determine whether the business is carried on in Canada, which is a threshold test based on the corporation’s presence in Canada.
The CRA has developed a list of factors it uses to determine if a non-resident corporation is carrying on business in Canada. The list includes some of the long-standing factors established by the Canadian courts – for example, the place where the business contracts are made and the location of the operations from which the profits in substance arise. The full list of the items the CRA considers are:
- The place where agents or employees of the non-resident are located;
- The place of delivery;
- The place of payment;
- The place where purchases are made or assets are acquired;
- The place from which transactions are solicited;
- The location of assets or an inventory of goods;
- The place where the business contracts are made;
- The location of a bank account;
- The place where the non-resident's name and business are listed in a directory;
- The location of a branch or office;
- The place where the service is performed; and
- The place of manufacture or production.2
According to the CRA, the determination does not involve the mechanical application of a numerical test of the above factors. Rather, the importance or relevance of a given factor would depend on the nature of the business activities the non-resident corporation carries on. In assisting taxpayers to properly apply these factors, the CRA has provided 21 examples in its publication based on different fact situations.3
A non-resident corporation should seek advice from its Canadian tax consultant with respect to its registration requirement in Canada, the taxability of the supplies made in Canada, and the applicable sales tax rate. In situations where a non-resident corporation is not required to register, it may still be able to voluntarily register if certain conditions are met. Voluntary registration may enable the non-resident corporation to recover some of the otherwise unrecoverable Canadian sales taxes it pays on the costs it incurs to generate its Canadian sales.
This article has been prepared for the general information of our clients. Specific professional advice should be obtained prior to the implementation of any suggestion contained in this article. Please note that this publication should not be considered a substitute for personalized tax advice related to your particular situation.
1 GST/HST Policy Statement P-167R, Meaning of the First Part of the Definition of Business.
2 GST/HST Policy Statement P-051R2, Carrying on business in Canada.
3 Ibid.
