Category Archives: Alerts

New Reporting Rules for Digital Platform Operators

Stately set of Corinthian Columns on a building in Montreal, Canada

On November 3, 2022, the Department of Finance introduced draft legislation to implement the reporting and due diligence standards of the Model Rules for Reporting by Platform Operators (the “Model Rules”) developed by the Organisation for Economic Co-operation and Development.

The draft legislation proposes to implement these Model Rules as part of the new Part XX of the Income Tax Act (Canada) (the “ITA”). Under the new Part XX, certain platform operators (“reporting platform operators”) would be required to determine the jurisdiction of residence of certain of the sellers on their platforms (“reportable sellers”) and to report certain information in respect of these reportable sellers and their activities subject to certain due diligence standards. These measures were initially announced as part of the 2022 Federal Budget. New Part XX of the ITA is proposed to come into force on January 1, 2024. A public consultation period for the draft legislation will run until January 6, 2023.

Reporting Platform Operators

Reporting platform operators are platform operators that are:

  • resident in Canada;
  • resident or incorporated or managed in a partner jurisdiction and who facilitates the provision of relevant activities by sellers resident in Canada or with respect to rental of immovable property located in Canada and elects to be a reporting platform operator; or
  • not resident in Canada or a partner jurisdiction, and who facilitates the provision of relevant activities by sellers resident in Canada or with respect to rental of immovable property located in Canada.

A platform operator is an entity that contracts directly or indirectly with sellers to make a software platform available for the sellers to be connected to other users for the (i) provision of relevant services including the rental of either immovable property or a means of transport or personal services, or (ii) the sale of goods. A platform also includes operations to collect compensation from users for the relevant activities (e.g. sale of goods, personal services, real property rentals) facilitated through the platform. Reporting platform operators are subject to the information reporting obligations under new Part XX unless they are an “excluded platform operator”.

Platform operators are excluded from the rules in Part XX if they can demonstrate that the platform’s underlying business model is such that sellers cannot derive a profit from compensation in connection with relevant activities through the platform, or that facilitate relevant activities through the platform only for sellers that are not reportable sellers.

There are further exemptions with respect to software platforms that exclusively facilitates the processing of compensation in relation to relevant activities; the mere listing or advertising of relevant activities; and the transfer of users to another platform, provided, in each case, that there is no further intervention in the provision of relevant activities.

Reportable Sellers

Reportable sellers will generally be active users (other than “excluded sellers”) that are determined by the reportable platform operator to:

  • be resident in a reportable jurisdiction;
  • have provided relevant services for the rental of immovable property located in a reportable jurisdiction; or
  • have been paid or credited consideration in connection with relevant services for the rental of immovable property located in a reportable jurisdiction.

A reportable jurisdiction is Canada or one of the partner jurisdictions with which there is an agreement in place to collect and share information in accordance with the Model Rules.

Specific exemptions will be provided for “excluded sellers” who generally include sellers of more than 2,000 relevant services for the rental of immovable property (i.e. large-scale hotels), governmental entities, certain public companies, and sellers with very low volume (less than 30 sales per year) and low value sales (not exceed €2,000 per year).

Reporting Requirements

Reporting platform operators would need to complete due diligence procedures to identify reportable sellers and their jurisdiction of residence including collection and verification of each reportable seller’s name, primary address, date of birth, tax identification number (“TIN”), the jurisdiction in which the TIN was issued, business registration number for entities, and the address of each property listed on the platform.

With respect to each reportable seller that provided relevant services, rented out a means of transportation or sold goods, the reporting platform operator is also required to report: (i) financial account identifiers to the extent available, (ii), the name of the holder of the financial account to which the consideration is paid or credited if such name is different from the name of the reportable seller, (iii) each jurisdiction in which the reportable seller is resident, (iv) the total consideration paid or credited during each quarter of the reportable period and the number of such relevant activities or relevant services in respect of which it was paid or credited, and (v) any fees, commissions or taxes withheld or charged by the reporting platform operator during each quarter of the reportable period.

With respect to each reportable seller that provided relevant services for the rental of immovable property, the reporting platform operator is also required to report the address of each property listing and, if available, the land registration number and where available, the number of days each property listing was rented during the reportable period and the type of each property listing.

The reporting platform operator is also required to determine whether the information collected is reliable, using all records available to the reporting platform operator, as well as any publicly available electronic interface to ascertain the validity of the TIN.

The reporting platform operator would be required to report to the Canada Revenue Agency such information on reportable sellers by January 31 of the year following the calendar year for which a seller is identified as a reportable seller. Reporting platform operators would also be required to provide the information relating to each reportable seller to that seller by the same date.

There is an anti-avoidance rule which provides that where a person enters into an arrangement or engages in a practice, the primary purpose of which is to avoid an obligation under new Part XX, the person is subject to the obligation as if the person had not entered into the arrangement or engaged in the practice.

Written by: Kevin Yip and Puyang Zhao

Facebooktwitterlinkedinmail

3 months to Doomsday: Offshore assets & Automatic exchange of information

hourglass-1703330_1280

What is the “automatic exchange of financial information”

In order to increase tax transparency across the globe, the Organisation for Economic Co-operation and Development (OECD) adopted the Common Reporting Standard (CRS) on July 15, 2014. The CRS initiative calls on each participating jurisdiction to obtain information from financial institutions within their country and automatically exchange that information with other jurisdictions on an annual basis. The objective is to increase tax compliance by providing key information to the participating jurisdictions allowing them to identify whether their citizens accurately report their foreign assets and income. However, since the CRS is not constraining, 90 jurisdictions have also signed the Multilateral Competent Authority Agreement (MCAA) on automatic exchange of financial account information. The MCAA provides a mechanism to facilitate the exchange of information in accordance with the CRS. Such information to be disclosed includes the following :

  • The name, address, taxpayer identification number, date and place of birth of each account holder;
  • The account number;
  • The name and identifying number of the financial institution;
  • The account balance or value (including, in the case of a cash value insurance contract or annuity contract, the cash value or surrender value) as of the end of the relevant calendar year or the closure of the account;
  • The total gross amount of interest, dividends and other income generated with respect to the assets held in the account.

Continue reading »Facebooktwitterlinkedinmail

Actifs étrangers et échange automatique de renseignements : 3 mois avant l’apocalypse

hourglass-1703330_1280

Qu’est-ce que « l’échange automatique de renseignements financiers »?

Afin d’accroître la transparence fiscale à travers le monde, l’Organisation de coopération et de développement économiques (OCDE) a adopté la norme commune de déclaration (NCD) le 15 juillet 2014. L’initiative de la NCD invite les juridictions participantes à obtenir des renseignements auprès des institutions financières de leur pays et à les échanger automatiquement avec d’autres juridictions sur une base annuelle. L’objectif est d’accroître l’observation des règles fiscales en fournissant des renseignements importants aux juridictions participantes afin de leur permettre de déterminer si leurs citoyens déclarent correctement leurs actifs et leurs revenus étrangers.

Cependant, puisque la NCD n’est pas contraignante, 90 juridictions ont également signé l’Accord Multilatéral entre Autorités Compétentes (AMAC) sur l’échange automatique de renseignements financiers. L’AMAC fournit un mécanisme pour faciliter l’échange de renseignements conformément à la NCD. Les renseignements à divulguer comprennent ce qui suit :

  • Le nom, l’adresse, le numéro d’identification du contribuable et la date et le lieu de naissance de chaque titulaire du compte;
  • Le numéro de compte;
  • Le nom et le numéro d’identification de l’institution financière;
  • Le solde ou la valeur du compte (y compris, dans le cas d’un contrat d’assurance comportant une valeur de rachat ou d’un contrat de rente, la valeur de rachat) à la fin de l’année civile concernée ou à la fermeture du compte;
  • Le montant total des intérêts, des dividendes et des autres revenus générés relativement aux actifs détenus dans le compte.

Continue reading »Facebooktwitterlinkedinmail

The CRA Assesses 1,000 Pharmacists for $58 million for Incentives Received from Generic Drug Companies

After a four year investigation, the Canada Revenue Agency (CRA) has assessed more than 1,000 pharmacists for what it says are unreported benefits they received from generic drug companies, such as gift cards, travel vouchers, and pre-paid credit cards. These benefits were incentives given to pharmacists by generic drug companies to entice them to substitute their product for brand-name products when filling prescriptions.

Continue reading »Facebooktwitterlinkedinmail