New Canadian GST HST rules may affect certain nonprofits

Jun 03, 2021
Nonprofit International tax

Significant changes to the goods and services/harmonized sales tax (GST/HST) rules in Canada could lead to GST/HST obligations for organizations operating outside of Canada with members or customers in Canada.

While these rules primarily target businesses selling digital products and services to consumers in Canada, the changes could affect certain nonprofits and associations. For example, associations that have members in Canada may be required to register for GST/HST if fees from members in Canada exceed $30,000. Additionally, nonprofits and associations earning fees for digital products and services from residents of Canada (e.g., online courses, access to a database, attendance to an online conference, etc.) may be required to register for GST/HST.

The existing GST/HST rules have generally allowed organizations that operated entirely outside of Canada to avoid any GST/HST obligations, even if the organization was selling products, services, or memberships to customers in Canada. The changes that will take effect July 1, 2021, will require all organizations that sell to customers in Canada to review if the new rules apply to them.

If an organization is subject to the new rules, it will be required to register for GST/HST by July 1 and will be required to charge and collect GST/HST on sales to customers in Canada starting July 1. Organizations may have additional information gathering requirements under the new rules, which could require significant changes to enterprise resource planning and billing systems.