GST/HST: Non-Residents, Imports and Place of Supply

The Goods and Services Tax and the Harmonized Sales Tax are imposed on taxable supplies made in Canada. That single phrase drives almost everything that follows. Whether a non-resident supplier owes Canadian tax, whether a Canadian recipient has to self-assess, whether an export escapes tax entirely, and which provincial rate applies all depend on rules that locate a supply in a particular place. These are the place-of-supply rules of the Excise Tax Act, and for cross-border businesses they are among the most consequential and least intuitive provisions in Canadian indirect tax.

This page explains how the place-of-supply rules treat goods, services, intangibles, and real property; when a non-resident must register because it is carrying on business in Canada; how the self-assessment or "reverse-charge" mechanism in section 218 works on imported taxable supplies; how the simplified registration regime for the digital economy operates; and when exports are zero-rated. It is general information about Canadian federal GST/HST law, not legal advice, and it is not advice about the law of any other country.

Why "made in Canada" decides everything

The charging provision for GST/HST, section 165 of the Excise Tax Act, imposes tax on the recipient of a taxable supply made in Canada. If a supply is made outside Canada, no GST/HST applies to it under the ordinary charging rule, and the supplier generally has no obligation to collect Canadian tax on it. So before any question of rate, registration, or input tax credits arises, you must determine two things: whether the supply is made in Canada at all, and, if it is, whether it is made in a participating (HST) province or a non-participating (GST-only) province.

The Act answers the first question through a set of deeming rules that differ by the type of supply, and the second through detailed place-of-supply regulations that assign a province to the transaction. A supplier that misreads either layer can end up either collecting tax it never had to collect, or failing to collect and register when the law required it. For non-residents, the stakes are higher still, because an unregistered non-resident that was in fact required to register can be assessed for tax it never charged its customers, with no realistic way to recover it after the fact.

The place-of-supply rules by type of supply

There is no single place-of-supply test. The Excise Tax Act sorts supplies into categories and applies different deeming rules to each. Getting the category right is the first analytical step.

Goods (tangible personal property)

For most sales of goods, a supply is deemed to be made in Canada if the goods are delivered or made available to the recipient in Canada. A supply of goods by way of lease, licence, or similar arrangement is generally made in Canada if possession or use of the goods is given or made available in Canada. So the physical location where the customer takes the goods, not where the seller is resident, usually controls. The province is then assigned based largely on where the goods are delivered.

Services

A supply of a service is generally deemed to be made in Canada if the service is, or is to be, performed in whole or in part in Canada. Because even partial performance in Canada brings a service within the Canadian net, cross-border service providers need to look closely at where work is actually carried out, not merely where the contract is signed or the invoice is sent. The province for a service is usually determined by the location of the recipient, subject to specific rules for particular kinds of services.

Intangibles (intangible personal property)

For intangible personal property, such as a licence of intellectual property or other rights, a supply is generally deemed to be made in Canada if the property may be used in whole or in part in Canada, or if it relates to real property, goods, or a service situated or performed in Canada. The test looks to the place of permitted use rather than actual use, which can pull a licence into the Canadian system even where the parties did not expect it.

Real property

Real property is the most location-driven category of all: a supply of real property, or of a service in relation to real property, is generally made in Canada when the property is situated in Canada. Because land cannot move, these supplies are nearly always treated as made where the property sits. The GST/HST consequences of dealing in Canadian real property are substantial, and we discuss them in more detail under GST/HST on real estate.

The non-resident override and "carrying on business in Canada"

Added to those category rules is an important override for non-residents. As a general matter, a supply made in Canada by a non-resident person is deemed to be made outside Canada unless the supply is made in the course of a business carried on in Canada, or the non-resident is registered for GST/HST, or certain other specified conditions apply. The practical effect is that the pivotal question for many non-resident suppliers becomes whether they are carrying on business in Canada.

That phrase is not exhaustively defined in the statute. The CRA assesses it on the totality of the circumstances, weighing a list of factors that has developed through administrative policy and the case law. Those factors commonly include the place where contracts are made, the place where the operations from which profits arise take place, the place of payment, the location of inventory, the place where purchases and sales are made, the location of a bank account, the presence of employees, agents, a branch or an office in Canada, the place where assets are located, the place of delivery, and the place where the business is solicited. No single factor is decisive; the weight given to each varies with the nature of the business.

The consequences of the conclusion are significant. A non-resident that is carrying on business in Canada and makes taxable supplies here is generally required to register under the ordinary regime and to collect and remit GST/HST, and it must also meet the Act's requirement that certain non-residents provide and maintain security for their tax liabilities as a condition of registration. A non-resident that is not carrying on business in Canada is generally not required to register under that regime, though it may still choose to register voluntarily in some circumstances, and may be caught instead by the self-assessment or simplified regimes described below. Because the line is fact-specific and the downside of guessing wrong is real, this determination is frequently where cross-border GST/HST advice begins. Our overview of GST/HST registration and compliance sets out the mechanics of registering and accounting for the tax once that threshold is crossed.

Self-assessment on imported taxable supplies (section 218)

If GST/HST were imposed only when a Canadian supplier or a registered non-resident made the supply, Canadian businesses could buy services and intangibles from unregistered non-residents free of tax, undercutting domestic suppliers. The Act closes that gap with a self-assessment, sometimes called a reverse charge, on imported taxable supplies.

Under section 218 of the Excise Tax Act, every recipient of an imported taxable supply must pay tax calculated on the value of consideration for that supply. In broad terms, an imported taxable supply captures supplies of services and intangible personal property acquired from outside Canada for consumption, use, or supply in Canada, where the supplier did not charge Canadian GST/HST. Instead of the non-resident supplier collecting the tax, the Canadian recipient accounts for it itself. The companion reporting and remittance rules in the surrounding provisions, including section 218.1 for the provincial (HST) component, govern how and when that self-assessed tax is reported.

The practical impact of section 218 depends heavily on whether the recipient is engaged exclusively in commercial activities. A fully commercial business that self-assesses tax under section 218 is generally entitled to a corresponding input tax credit, so the self-assessment is frequently a wash from a cash perspective, although it must still be reported correctly. The exposure is most acute for recipients that cannot fully recover the tax, such as financial institutions, exempt suppliers, charities, and others with restricted input tax credit entitlement, because for them the self-assessed tax is a genuine cost. These are exactly the recipients the CRA reviews on audit, and an unreported section 218 liability can be reassessed with interest. Where a self-assessment turns on whether an input tax credit was available, the analysis overlaps with the issues we address under input tax credit denials.

The simplified registration regime for the digital economy

For years the place-of-supply and carrying-on-business rules left many cross-border digital sales outside the GST/HST net, because the foreign vendor was not carrying on business in Canada and the consumer recipient had no practical obligation to self-assess. Canada addressed this with a simplified GST/HST registration regime aimed at the digital economy, which took effect on July 1, 2021.

The simplified regime applies, broadly, to three groups: non-resident vendors that supply digital products and services to Canadian consumers; operators of distribution platforms that facilitate such supplies by third-party vendors; and, in the goods context, non-resident vendors and platform operators connected with the supply of goods held in fulfilment warehouses in Canada. Where these businesses exceed a registration threshold based on their supplies to Canadian recipients who are not registered, they must register and collect GST/HST.

The defining feature of the simplified regime is that it is deliberately streamlined. A business registered under it accounts for and remits GST/HST on its qualifying supplies, but it is generally not entitled to claim input tax credits, reflecting the trade-off for a lighter-touch registration that does not require the full apparatus of ordinary registration. A non-resident that would prefer to recover its Canadian tax inputs may instead register under the ordinary regime, and choosing between the two paths is a real decision with cash-flow and compliance consequences. The distinction between supplying a registered business customer and supplying an unregistered consumer is central, because it determines both who must collect and which regime applies. Getting the registration posture right at the outset is far easier than unwinding an incorrect one after an audit.

Zero-rated exports

The mirror image of taxing imports is relieving exports. Canada generally does not export its consumption tax, so many supplies destined for use outside Canada are zero-rated, meaning they are taxable supplies subject to GST/HST at a rate of 0%. The crucial advantage of zero-rating over exemption is that a supplier of zero-rated goods or services can still claim input tax credits on its related inputs, whereas a supplier of exempt goods or services cannot.

The zero-rating rules for exports appear in Part V of Schedule VI to the Excise Tax Act. They cover, among other things, certain exports of goods to a recipient outside Canada, certain supplies of services and intangible property made to non-residents, and various international transportation and related supplies. Each zero-rating provision, however, comes with detailed conditions. Export relief on goods, for example, typically depends on the goods actually being exported and on the supplier maintaining satisfactory documentary evidence of export; relief on services to non-residents is hedged with exclusions, such as services rendered to an individual while in Canada or services in respect of real property situated in Canada. The documentary record is decisive: zero-rating that cannot be substantiated on audit is routinely reassessed, with the supplier left to account for tax it did not charge. Treating zero-rating as a documentation discipline, not just a rate, is the difference between relief that holds and relief that collapses.

Where cross-border GST/HST disputes arise

The cross-border rules generate a recognizable set of disputes. A non-resident is assessed for failing to register and collect on the view that it was carrying on business in Canada. A Canadian recipient is reassessed for unreported self-assessment under section 218 on imported services. A digital-economy vendor is challenged on whether it crossed the simplified-registration threshold, or on the consumer-versus-registrant character of its customers. An exporter has its zero-rating denied for want of documentary proof of export. A registrant has input tax credits tied to cross-border purchases disallowed. Each of these turns on the same handful of statutory concepts examined above, applied to a particular set of facts.

Because these issues sit at the intersection of GST/HST and broader cross-border tax planning, they rarely arise in isolation. A non-resident expanding into Canada is also thinking about income tax nexus, withholding, and structure, which we address through our cross-border tax practice. And when the CRA does take a position, the matter proceeds through the same audit, objection, and appeal channels as other indirect-tax disputes, which we describe under GST/HST audits and disputes.

How Barrett Tax Law approaches this

When a cross-border GST/HST question comes to us, we start by characterizing the supply. We identify whether it is a supply of goods, a service, intangible property, or real property, apply the corresponding place-of-supply rule to determine whether it is made in Canada, and, for non-residents, work through the override and the carrying-on-business factors before any conclusion about registration is reached. For Canadian recipients, we assess whether section 218 self-assessment applies and whether a corresponding input tax credit is available, so the real exposure is understood rather than assumed.

From there, we help businesses choose and implement the right registration posture, whether ordinary or simplified, document zero-rated exports so the relief can withstand review, and respond to CRA assessments and audits that challenge any of these positions through objection and, where warranted, appeal. We coordinate the indirect-tax analysis with the income-tax and structuring questions that almost always travel alongside it.

Every business and every transaction is different, and nothing on this page is a prediction about how any particular matter will be treated. If you are a non-resident considering supplies into Canada, a Canadian business buying services or intangibles from abroad, or a registrant facing a cross-border GST/HST audit, you are welcome to contact us for a free, confidential consultation to discuss your situation and the options available to you.