Some people ask, I am a TikTok internet celebrity, and I sell products through internet broadcasting, how should I file my tax returns? Others ask, I quit my job and am now a full-time Uber driver, how do I file my taxes? While some others ask, I purchase goods from overseas and sell them on social media in Canada, and then sell the goods back to China through Taobao, how should I file tax returns?
WeChat business and all the economic models mentioned above are only part of the platform economy. As a multilateral market model developed in the Internet era, the platform economy connects buyers and sellers through a network platform built by a third party and provides everyone with commodities, services, or places for information exchange. Most platform economies known to us includes Apple, Google, Amazon, Baidu, Alibaba, Facebook, eBay, etc.
Companies are entitled to declare corporate tax if they earn income through these platforms, but how should individuals who earn income through these platforms file tax returns in compliance with Canadian tax law? And how will new regulations on the GST/HST by market platform suppliers which came into effect on July 1, 2021 affect us?
SHARED CAR SERVICES UBER/LYFT
Shared car service is considered taxi business in Canada. Individuals must declare personal tax on service income and tips earned through the shared car platform. Personal tax must be declared and filled in T2125 according to self-employment. Expense deductions include gas, insurance, telephone bills, maintenance fees, toll fees, parking fees and platform service fees, etc.
As for GST/HST, you must register for GST/HST and file an annual return regardless of your income. The platform will collect for you but not responsible for helping you declare or pay taxes.
SHORT-TERM RENTAL/LODGING SHARING SERVICE AIRBNB
The income earned by individuals renting their own houses through short-term rental platform needs to declare personal tax. Whether additional services other than basic accommodations are provided is considered when choosing between T2125 for self-employment or T776 for rental income. Income from providing additional parking spaces or washing machines will not be result in the change from rental income to self-employment, however if income from services such as catering, cleaning, etc. are involved, then it is a proper business practice and needs to be reported as self-employment income. Expense deduction requires professional accountant evaluation based on the supporting documents provided.
Regarding GST/HST, even if you are renting out your home, the buyer must pay GST/HST according to CRA short-term rental regulations. New rules for digital economy businesses which took effect on July 1, 2021 stipulates that for landlords without GST/HST numbers, the short-term rental platform is responsible for collecting and paying taxes to the tax bureau; landlords who have registered GST/HST numbers are still responsible for filing and paying taxes by themselves.
Since regulations for short-term rental industry are equivalent to those for the hotel industry for most provinces. Platforms need to collect provincial and other local taxes from buyers which are usually collected and paid by service providing platforms.
ONLINE JOBS
Online jobs ways of using your own resources to sell short-term services through the platform, which may be doing web research, translation, graphic design, legal advice or maintenance, etc. This is obviously self-employment and T2125 form is required, but what if you paid income tax for this job abroad already? A tax deduction is applicable through filling T2209. Importance note is that it is your responsibility to provide invoices and records in accordance to your income and expenditure.
Regarding GST/HST, if you have more than CAD $30,000 in income in any quarter or in the past four consecutive quarters, you need to register for a GST/HST number and file for a tax return. The platform is not obligated to pay taxes on your behalf by law, please advise your accountant or platform for more details.
PEER-TO-PEER/MICRO-BUSINESS
Peer-to-peer is what commonly knowns as micro-business. The income earned by individuals selling goods through the market network platform needs to be included in personal tax and declare self-employment income using form T2125. If you have paid income tax aboard due to the buyer’s territory issues, you need to fill form T2209 for deduction. You are responsible for sorting and storing required documents for self-employment expenses deduction.
Regarding GST/HST, if you have more than CAD $30,000 in income in any quarter or in the past four consecutive quarters, you need to register for a GST/HST number and file a tax return. New rules in effect on July 1st 2021 will make tax filing easier for sellers on Amazon platform, for sellers previously not registered with a GST/HST number, the Amazon platform is responsible for collecting and paying taxes. Registered Sellers who provide GST/HST numbers are still responsible for declaration and payment. Amazon platform can help you calculate and count taxes, but you need to set up corresponding functions in your account. For specific settings, please consult Amazon.
(Please note: Per our understanding, GST/HST number exemption refers to less than CAD$30,000. For income exceeding CAD$30,000, GST/HST registration number is required per CRA requirements.)
Regarding provincial tax, most physical products need to pay provincial tax depending on buyer’s residency. Amazon now only cooperates with Saskatchewan to collect and pay provincial tax (PST), with the belief that other provinces will soon follow up on cooperation. If you are selling on Amazon, please check with your accountant or Amazon to confirm your tax obligations.
SOCIAL INFLUENCER
Social influencer is an economic model in which many people realize and make profits through their own strengths. They can earn income through paid subscriptions, bringing goods, advertisements, sponsorships, tips, fan gifts, etc. These incomes may be either cash or non-cash income. The CRA uniformly recognizes this type of income as commercial income and declare through form T2125 is required. It is your responsibility to sort and save the corresponding direct cost documents.
Regarding GST/HST, general practice for registration and declaration depends on whether you earn an overall income of more than CAD$30,000 or not. Please consult the CRA or an accountant for comprehensive judgment on tax obligations.
If you have any tax questions about the digital (cyber) economy related businesses, you are welcome to contact us at 604-232-1070 to make an appointment.