Digital platform operators must act now to collect information from specific sellers who use their platforms, as part of new annual tax reporting obligations. Under these new compliance rules, reporting platform operators are required to collect and verify data from certain sellers that use their platforms to sell goods, provide services, or rent real property, beginning with the 2024 calendar year. These operators must ensure they have all necessary information to file their first reports with the CRA by January 31, 2025. In addition to filing with the CRA, these operators must also provide specific data to certain sellers by the same deadline.
Many digital platform operators and other businesses facilitating sales for third-party sellers may be affected by these new reporting rules. For instance, a retailer facilitating third-party sales through its digital platform may need to comply. Operators should ensure their systems are collecting all required data well in advance of the upcoming filing deadline. Note that the CRA has not yet published guidance on these new obligations and related filing processes.
The federal government announced these new reporting rules for digital platform operators in the 2022 federal budget. Under these rules, many platform operators resident in Canada, as well as certain non-resident operators, must report specific details related to their sellers to both the CRA and the sellers themselves. The CRA will use this information to ensure that revenues earned by sellers through digital platforms are properly reported and taxed. These rules are effective January 1, 2024, with the first reports for the 2024 calendar year due January 31, 2025. These reporting rules generally follow the Model Rules for Reporting by Platform Operators developed by the OECD.
Who is Subject to the Reporting Rules?
Canadian-resident platform operators, as well as certain non-resident platform operators, must report data from certain sellers starting with the 2024 calendar year if they meet the definition of a “reporting platform operator.” A platform operator is an entity that makes all or part of a platform available to sellers under an agreement and connects sellers and other users for the provision of relevant services or the sale of goods.
Data Collection Requirements
Reporting platform operators must collect specific data from most sellers who use their platform under the new reporting rules. The required data varies based on the type of seller and must be verified through specific due diligence procedures. For individual sellers, the required data includes the seller’s name, primary address, Tax Identification Number (TIN), and date of birth. For other sellers, the data includes the entity’s legal name, primary address, TIN, and business registration number.
If a seller does not provide their TIN, they may face a $500 penalty per failure. Operators must also collect TINs from sellers located outside Canada, which may include VAT/GST registration numbers. These TINs must be kept confidential unless the seller provides written consent.
Due Diligence Procedures
Affected operators must verify the reliability of the data collected from their sellers using “all records available,” including publicly available electronic interfaces. These due diligence procedures must be completed by December 31, 2024, for the first reporting period. Relief measures allow operators to rely on due diligence procedures from previous years if the seller’s primary address has been verified within the last 36 months and the operator has no reason to believe the data is unreliable.
Operators must determine which of their sellers are considered “reportable sellers” and gather additional information annually from their systems related to these sellers.
ClearWealth Accounting Advisors specialize in reporting requirements for online sellers in Canada
For operators providing services related to rental of real property in Canada or partner jurisdictions, it is essential to be aware of the reporting obligations imposed by tax authorities. Specifically, affected operators in Canada must report on services provided by sellers and gather specific details for each reportable seller to comply with regulations.
The key details required for reporting include:
- Tax Identification Number (TIN) and jurisdiction
- Financial account identifiers
- Name of the account holder
- Seller’s residency jurisdiction
- Consideration paid or credited per quarter
- Fees, commissions, or taxes withheld
- Additional details for sellers offering real property rental services
Operators must diligently gather and report this information, ensuring accurate reporting for each quarter. Any adjustments to sales must be reflected in revised reports filed with the tax authority.
Reporting deadline: January 31, 2025
Affected operators are mandated to file reports with the Canada Revenue Agency (CRA) containing the necessary data for reportable sellers by January 31 of the following calendar year. Additionally, individual reports must be provided to each reportable seller to fulfill reporting requirements.
It is crucial for operators to understand these new reporting rules, which differ from existing provincial tax reporting regulations. Compliance with these rules is vital to avoid penalties and ensure proper reporting to the CRA.
Enhanced scrutiny by the CRA is expected due to these new obligations, and operators should be prepared to provide detailed reports to assist with audit processes. Separate reports must be sent to sellers, containing specific information pertinent to each reportable seller.
Working with ClearWealth
At ClearWealth, we understand the complexities and challenges these new reporting obligations present to digital platform operators. Our team of expert accountants and compliance professionals are here to help you navigate these new rules, ensuring your systems are equipped to collect and verify the required data. We provide comprehensive services to assist with your due diligence procedures and ensure that your reports with the CRA are filed accurately and on time. Trust ClearWealth to help you meet these new compliance obligations efficiently and effectively, allowing you to focus on your core business operations.
Contact ClearWealth today to learn more about how we can assist you in navigating the complex landscape of tax reporting requirements for digital platforms.
