New Registration Requirements Could Mean Additional Administrative Burdens for US Companies That Do Business With Our Neighbors Up North
Canadian tax authorities this month introduced new rules for foreign vendors and digital platforms active in the Canadian marketplace requiring these entities to register for GST/HST purposes. Effective July 1, 2021, the changes apply to transactions between Canadian consumers by and certain foreign vendors and digital platform providers. Upon registration, the foreign impacted parties will be required to charge and remit the appropriate goods and services tax (GST) or harmonized sales tax (HST) depending on the provinces to their Canadian consumers. To facilitate this new provision, the Canada Revenue Agency has made available a simplified online registration and remittance system to for the affected foreign entities.
For a summary of the new rules, follow the link below.
ICYMI: Changes to EU and U.K. VAT Procedures
Following Brexit, significant changes have also been made to both the European Union’s and United Kingdom’s procedures for collecting value-added tax (VAT). As of July 1, 2021, businesses dispatching goods or services from a single EU member state may now register in a single state to collect the required foreign VAT on B2C transactions under a new policy rate that has been dubbed the “One-Stop Shop,” or OSS. The changes are part of an EU e-commerce VAT reform package that categorizes e-commerce transactions into one of three schemes:
- Import One-Stop Shop: For low value goods delivered from outside the EU
- Union One-Stop Shop (Union OSS): Intra-EU B2C deliveries of goods and services
- Non-Union One-Stop Shop (Non-Union OSS): Applies to EU services provided by non-EU businesses
These changes are relevant for entities that use the OSS scheme to avoid having to register in multiple EU countries and have instead opted for one central registration within the EU to report all EU transactions through a single OSS tax return. Payments remitted are then distributed from one EU member state to the other states where the VAT is due based on the location of the consumer.
The U.K. also announced significant changes, effective July 1, 2021, to its own OSS rules. These changes will force U.S. entities active in the U.K. and the EU to reassess the favorability of offering goods or services to customers in these jurisdictions, or at the very least, determine which location is the most suitable to register or deregister. These entities will also need to consider the impact of the changes described above if sales to consumers are made through an online marketplace. Finally, they will need to agree on who is responsible for collecting VAT on their B2C shipments and to assess how suitable their accounting procedures are for VAT purposes.
For More Information or to Discuss Your Options, Contact BPM
For further information on these significant changes in Canada, the EU and the U.K., please reach out to your BPM accounting team or contact Frank Van Hulsen, Managing Director and Head of our VAT Team, at [email protected].