As a non-resident in Canada, it is easy to be overwhelmed by the taxation system, especially when you are a business neophyte, an independent contractor working in the gig economy, or driving for ride-sharing services such as Uber and Lyft. One such pitfall that Canadian non-residents are behind is GST/HST (Goods and Services Tax/Harmonized Sales Tax).
Not complying with or being unaware of your GST/HST obligations will cause penalties and other issues with the Canada Revenue Agency (CRA). That’s why having a non-resident GST/HST business number is crucial. This number is your gateway to legally registering, charging, and remitting the correct sales taxes.
This comprehensive guide will take the mystery out of the process. We’ll provide a step-by-step walkthrough of how to get your non-resident GST/HST business number so that you can avoid costly traps and stay compliant with Canadian tax laws. Let us get you well underway!
Understanding Non-Resident Status in Canada
If your social insurance number (SIN) begins with the digit 9, you are then a non-resident of Canada. This would include students, temporary employees, or anyone in Canada without permanent resident status or citizenship. As a non-resident, you can start a business, such as driving for Uber or Lyft, but you are required to register for a non-resident business number and GST/HST account.
The Importance of a Non-Resident GST/HST Business Number
Obtaining a non-resident GST/HST business number is important for the following reasons:
- It enables you to run a business in Canada legally and charge the correct sales taxes (GST and/or HST) to your customers.
- It keeps you under Canadian tax laws and allows you to remit over the collected amount to the Canada Revenue Agency (CRA) at the close of each reporting period.
- Having a business number on the register can also enable you to claim business expenses when you file your individual income tax return, which can decrease your tax liability.
Step-by-Step Process to Acquire a Non-Resident GST/HST Business Number
Now, let’s go through the process of registering for your non-resident GST/HST business number:
1. Government of Canada Website
First, navigate to the Government of Canada website at canada.ca. From the homepage, locate the “Taxes” section and click on “Business number and GST/HST registration.”
2. Choose the Non-Resident Registration Option
On the “Business number and GST/HST registration” page, look for the “Register using the non-resident registration web” option and click on it. This will take you to the non-resident registration process.
3. Provide Your Personal Information
In the non-resident registration form, you’ll be asked to provide the following information:
- Your full name
- Your social insurance number (SIN), which should start with the number 9
- Your business name
- Your business type (e.g., sole proprietorship)
- Your preferred language of communication (English or French)
- Your email address and your business street address in Canada
4. Choose the Right Program Accounts
When asked, choose the “Goods and Services Tax/Harmonized Sales Tax (GST/HST)” program account. This will enroll your business for the relevant sales taxes in Canada.
5. Give Business and Sales Information
You’ll then be requested to enter information regarding your business operations and forecasted sales in Canada:
- Your primary business activity (e.g., rideshare driver)
- Expected sales amount in Canada for a 12-month period
- Expected global sales for a 12-month period
- Ending date of your fiscal year (usually December 31st for sole proprietorships)
- Effective date of your GST/HST registration (ordinarily the day you began conducting business activities in Canada)
6. Confirm and File Your Application
Double-check the details you’ve submitted, and once confirmed, file your non-resident GST/HST business number application. The CRA will generally process these in 15 business days, after which you’ll get your business number and GST/HST account information.
Backdating Your GST/HST Registration
If you’ve been operating your business in Canada for a while without a GST/HST number, you might need to backdate your registration. You’ll need to present proof, like your first Uber or Lyft tax summary, to the CRA to confirm the date that you began business operations. The CRA will be able to backdate your registration to the appropriate start date so that you can comply with sales tax obligations.
Ongoing Compliance and Reporting
Once you’ve registered for a non-resident business number and GST/HST account, the following ongoing obligations are yours to fulfill:
- Collecting the proper GST or HST from your clients on every transaction
- Paying the collected taxes to the CRA on a regular basis (annually, quarterly, or monthly, depending on estimated sales)
- Maintaining proper records of your business income and expenses, since you will be asked to report the same while filing your personal income tax return
- Informing the CRA of any change in your business information, including a change of address or contact information
Maximizing Your Tax Deductions
You as a GST/HST registrant may generally claim ITCs when claiming the GST/HST you paid on qualified business expenses. Some of the common deductible expenses that rideshare drivers may have are:
- Insurance premiums
- Parking ticket and toll
- Depreciation part on your car
- Phone and data plan fees
- Equipment for business and supplies for an office
By monitoring and tracking your business expenses, you can potentially reduce your overall tax liability and increase your tax refund.
Conclusion
It may be difficult to figure out your tax status as a non-resident of Canada, but registering your GST/HST business number is a key step to being in good standing with the Canadian tax regulations. By understanding and following the process, you will be able to register your business, charge and remit your sales taxes properly, and have the ability to claim qualifying Input Tax Credits (ITCs) to reduce your taxes.
Keep in mind, though this information is a good overview, professional advice from a experienced tax accountant or accountant who has knowledge of non-resident taxation is highly advisable. Stay informed, stay compliant, and get started!
