As global commerce continues to expand, Canadian businesses are increasingly transacting with customers and suppliers across borders, and non-residents are engaging with the Canadian market. Understanding how GST/HST and international tax rules apply is crucial in today’s global business environment. In our previous article, we explored Provincial Sales Tax (PST) obligations across Canada — now we turn to GST/HST, international considerations such as VAT, and the practical implications for small businesses.
In the context of GST/HST, a non-resident is any person or business that is not considered a resident of Canada for tax purposes. This definition is not strictly tied to physical presence — it can also depend on where your business is managed or controlled.
A non-resident may still be required to register for GST/HST if they:
Non-residents are not eligible to use the Quick Method of Accounting for GST/HST. The Quick Method is only available to qualifying Canadian small businesses. Non-residents required to register must report actual GST/HST collected and paid on expenses.
A U.S.-based digital marketing agency serving clients in Ontario may be considered to be “carrying on business in Canada” despite having no Canadian office. This could require the agency to:
Unlike Canada’s federal GST/HST, the U.S. has no national sales tax. Instead, sales taxes are imposed at the state and local levels. Rules vary significantly by jurisdiction.
For example, many U.S. states have adopted economic nexus laws, meaning that once a business exceeds certain sales or transaction thresholds in that state (even without physical presence), it must register, collect, and remit sales tax.
This means that even a Canadian or other non-U.S. business selling into the U.S. may face sales tax obligations in multiple states. Failure to comply can result in penalties or restrictions on continuing sales.
VAT (Value-Added Tax) is the international equivalent of GST/HST and is used in over 160 countries, including EU member states, the UK, and Australia. While conceptually similar, VAT systems differ in registration thresholds, filing requirements, and tax rates.
Canadian businesses selling to customers in VAT jurisdictions need to understand local obligations. Many countries now require foreign businesses to register for VAT on digital or remote services, even without a physical presence.
The EU recently introduced the One Stop Shop (OSS) system for non-EU businesses. This allows Canadian businesses selling digital goods or services to EU consumers to:
If a business fails to register under the OSS when required, it may have to register and file separately in each EU country where it conducts business.
Post-Brexit, the UK also has its own VAT thresholds and remote seller rules that affect Canadian exporters.
These changes mean that even small Canadian businesses — especially those in software, e-commerce, or digital media — may now have tax obligations abroad despite not having a physical presence.
Canadian businesses selling into the U.S. may also need to comply with state-level sales tax rules. For example:
Because every U.S. state sets its own rules, compliance can become complex for Canadian exporters — and requirements can change quickly.
Canadian individuals running businesses from abroad may still be considered residents for Canadian tax purposes, depending on their ties to Canada. This means they may need to collect GST/HST on Canadian-source revenue, even while living overseas.
Cross-border sales can create unexpected compliance responsibilities in Canada, the U.S., and abroad. Small businesses should keep in mind:
If you are unsure about your tax obligations as a non-resident or international seller, the team at GBA is here to help. We will ensure your business is properly registered, invoicing correctly, and meeting both Canadian and international requirements.
This article concludes our series on GST/HST for non-residents, offering small businesses the insights they need to confidently manage tax responsibilities both within Canada and abroad. Partnering with GBA ensures your business remains compliant, efficient, and well-prepared for global opportunities.
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This blog is not meant to provide specific advice or opinions regarding the topic(s) discussed above. Should you have a question about your specific situation, please discuss it with your GBA advisor.
GBA LLP is a full-service accounting firm in the Greater Toronto Area, but we primarily service all of Ontario as well as the rest of Canada virtually, except Quebec. Our team of over 30 provides audits and reviews of financial statements, compilations of financial information, and corporate tax returns. We provide specialized corporate tax and succession planning for small and medium businesses, in addition to general advisory services.
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