DFK Tax Newsletter

Do You Earn Revenue Through a Digital Platform?

In Canada, taxpayers generally have an obligation to report all revenue earned, including all revenue from business activity and rental activity. 

As more businesses started using online digital platforms, taxing jurisdictions throughout the world began raising concerns that not all taxpayers selling goods and services through digital platforms were aware of the tax implications of their online activities.  There were also concerns that transactions occurring digitally through online platforms may not be visible to tax administrations making it difficult to identify non-compliance with respect to revenue earned.

There are many different categories of digital platforms, some of the more common examples of digital platforms where taxpayers earn revenue include: Amazon, Shopify, E-bay, Kijiji, Airbnb, Vrbo, Uber, and Lyft. 

On July 3, 2020, the Organisation for Economic Co-Operation and Development (“OECD”) issued a report called Model Rules for Reporting by Platform Operators with respect to Sellers in the Sharing and Gig Economy.

In Budget 2022, Canada announced it would implement the model rules contained in the OECD report.  The new reporting rules for digital platforms became effective for the 2024 calendar year.

The new reporting rules will significantly expand the information available to Canada Revenue Agency (“CRA”) with respect to revenue earned through a digital platform and will greatly increase CRA’s ability to ensure taxpayers are reporting revenue earned online.

In addition, CRA will share the information it receives with partner jurisdictions (which are other countries that have adopted the OECD model rules or similar rules) and those other partner jurisdictions will share the information they have received with CRA.

Reporting platform operators are now required to file a Part XX Information Return with CRA to report specific information to CRA with respect to certain sales made through a digital platform.  

The original filing deadline for the 2024 Part XX Information Return was January 31, 2025; however, CRA announced that it would be temporarily waiving penalties for the late filing of these information returns until July 31, 2025. 

A reporting platform operator is required to report certain information to CRA with respect to reportable sellers, including:

For reportable sellers that are individuals:

• the first and last name of the individual;
• the primary address of the individual;
• the Taxpayer Identification Number (“TIN”) issued to the individual, including the jurisdiction of issuance; and
• the date of birth of the individual.

For reportable sellers that are not individuals:

• the legal name of the entity;
• the primary address of the entity;
• the TIN issued to the entity, including the jurisdiction of issuance; and
• the business registration number of the entity.

In addition to the general identity information listed above, a reporting platform operator is required to report certain information to CRA related to the transactions of the reportable seller, including:

• any financial account identifiers that are available to the reporting platform operator;
• if different from the name of the reportable seller, the name of the holder of the financial account to which the consideration is paid or credited, to the extent available, as well as any other identifying information available to the reporting platform operator with respect to that account holder;
• each jurisdiction in which the reportable seller is resident;
• for rentals of real property, the address of each property listing and, if available, the land registration number;
• the total consideration paid or credited during each quarter of the reportable period and the number of goods sold, services provided, or rentals made (with respect to each property listing) in respect of which the consideration was paid or credited;
• for rentals of real property, if available, the number of days each property listing was rented during the reportable period and the type of each property listing; and
• any fees, commissions or taxes withheld or charged by the reporting platform operator during each quarter of the reportable period. 

A reporting platform operator is required to provide reportable sellers with a copy of the information reported to CRA about them.

A “reportable seller” is a defined term in the Income Tax Act (“ITA”).  Generally, most taxpayers that are earning revenue through a reporting platform operator will fit into the definition of “reportable seller” unless they are an “excluded seller”.

“Excluded seller” is also a defined term in the ITA.  There are several paragraphs in this definition.  Generally, the most relevant paragraph will be the one related to the number of transactions and the dollar amount of the transactions.  Basically, a seller for which a platform operator facilitated less than 30 transactions and for which the total amount of consideration paid or credited did not exceed $2,800 during the reportable period (the calendar year) will be an “excluded seller”.

If the revenue you are earning through a digital platform is related to any type of business activity or rental activity, keep track of your costs related to these activities as these costs should be deductible for income tax purposes in most cases.  One exception is that expenses related to a non-compliant short-term rental are not deductible for income tax purposes, for tax years after 2023.

A short-term rental is a residential property that is rented or offered for rent for a period of less than 90 consecutive days.

For these purposes a residential property means all or any part of a house, apartment, condominium unit, cottage, mobile home, trailer, houseboat or other property, located in Canada, which can be used for residential purposes under the applicable laws of the province or municipality where the property is located.

A non-compliant short-term rental is a short-term rental that:

• is located in a province or municipality that does not permit short-term rentals to operate at that location; or
• does not comply with all applicable provincial or municipal registration, licensing and permit requirements for operating a short-term rental.

In summary:

• if you are a reporting platform operator, you are now required to file an annual Part XX Information Return on a timely basis;
• if you are earning revenue through a digital platform, ensure the revenue is reported appropriately and ensure you are claiming all deductions you are entitled to in relation to the revenue being reported; and
• consider any potential sales tax or lodging tax/occupancy tax issues related to any revenue earned through a digital platform.

Please contact your local DFK advisor if you would like to discuss how the new reporting rules for digital platforms may affect you.