Compliance in the platform economy

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Platform economy

The platform economy includes economic and social activities facilitated by the use of technologies such as the Internet and mobile applications. A mobile application, commonly referred to as an app, is a type of software designed to run on a mobile device, such as a smartphone or tablet computer.

Platforms connect buyers and consumers with sellers and service providers. Within the platform economy, the Canada Revenue Agency (CRA) has identified four types of businesses:

  1. Sharing economy: Using or sharing personal assets to earn revenue (for example, Airbnb, CanadaStays, Uber, Lyft, Uber Eats, DoorDash)
  2. Gig economy: Freelance or short-term contract-based work (for example, Clickworker, Crowdsource, Fiverr)
  3. Peer-to-peer (P2P): Selling of goods from one person or party directly to another (for example, Etsy, eBay, Amazon)
  4. Social media (or social influencers): Income earned through social media platforms via advertisement revenue, subscriptions, product placement, product promotion (for example, YouTube, Instagram, Twitch, Facebook, Twitter)

Understanding your tax obligations

There are many platforms that taxpayers can use to generate income. The ones listed above are examples, but there are a lot more that are not listed here. If you use any platform, be aware of your obligations for income tax, as well as for goods and services tax / harmonized sales tax (GST/HST).

Income tax implications

If you participate in the platform economy, you may be considered to be self-employed and carrying on a business, in which case your tax obligations are different from those of an employee.

If you are self-employed, you have to do the following five things:

Expenses

You may be able to claim eligible Business expenses related to your platform activities on your income tax and benefit return. To be deductible, business expenses must generally be incurred for the purpose of earning income from your platform activities, must not be on account of capital, must not be personal expenses, and must be reasonable in the circumstances. To determine your expenses, you need to keep records of:

GST/HST implications

The following table explains when you should register for a GST/HST account.

The following table explains when you should register for a GST/HST account.
If Then What you need to do
You do not exceed the $30,000 threshold over four consecutive calendar quarters. You are a small supplier. You do not have to register. You may choose to register voluntarily if you make taxable sales, leases, or other supplies in Canada. Your effective date of registration is usually the day you ask for your GST/HST account (or up to 30 days before that day).
You exceed the $30,000 threshold in one calendar quarter. You are no longer a small supplier, and you have to charge GST/HST on the supply that made you exceed $30,000 within the calendar quarter and all taxable supplies thereafter. For more information about calculating the small supplier threshold, go to When to register for and start charging the GST/HST. You must register.
Your effective date of registration is no later than the date of the supply that made you exceed $30,000.
You have to start charging GST/HST on the supply that made you exceed $30,000.
You exceed the $30,000 threshold over the previous four or fewer consecutive calendar quarters (but not in a one calendar quarter). You are no longer a small supplier at the end of the month following the quarter in which you exceed $30,000. You have to register. Your effective date of registration is no later than the beginning of the month after you are no longer a small supplier.
You have to start charging GST/HST on your taxable supplies as of your effective date of registration.

Small supplier

If you are a small supplier who earns less than $30,000 of gross revenue from worldwide taxable sales, you may voluntarily register to take advantage of the related input tax credits (prorated in the same way as the expenses that are deducted for income tax purposes). If you are already registered for GST/HST, you have to collect and remit (pay) GST/HST to the CRA even if your gross revenue on taxable sales is not more than $30,000.

If you are earning income from ridesharing, you have to register for GST/HST regardless of whether you earn more than $30,000 annually from your ridesharing activities. See ridesharing to review the GST/HST requirements, because the rules changed as of July 1, 2017.

After GST/HST registration

After you are registered for GST/HST, you will need to:

For more information on GST/HST registration, go to Register for a GST/HST account.

For more information about your tax obligations, go to Checklist for new small businesses.

If you live in Quebec, your reporting requirements may be different because you need to report to the CRA and Revenu Québec. For more information about your tax obligations, go to General Information – Individuals (Revenu Québec).

Sharing economy

The sharing economy connects individuals and businesses that are looking for a product or service to those that offer it. Arrangements are generally booked using online platforms through a third party, or using a website or a software application. The sharing economy includes everyone who registers with the third party, from individuals looking to earn a bit of money performing a task a few hours a week, to businesses looking to tap into the market of consumers shopping on the platform.

The sharing economy can take a variety of forms, such as:

Ridesharing

Ridesharing is an arrangement in which a passenger travels in a private vehicle, usually for a fee, and arranged by means of a website or a mobile application (app).

Definition of a taxi business

Effective July 1, 2017, the definition of a taxi business for GST/HST purposes was changed to include anyone who provides ridesharing services. A taxi business includes any transportation of passengers for a fare, and arranged or coordinated through an electronic platform or system.

For the rules on transportation services that fall under the CRA definition of a taxi business, go to GST/HST information for taxi operators and commercial ridesharing drivers.

Tax obligations

Regardless of how much time you spend driving your vehicle for fares, you are considered to be a taxi in Canada. You must:

As an owner/driver participating in the ridesharing industry, you may be relying on an application or website to collect your fares. It is your responsibility to make sure that either you collect and remit (pay) the related GST/HST to the CRA or that the GST/HST is collected and sent to the CRA on your behalf. You can use the GST/HST calculator (and rates) to help you calculate the GST/HST you have to collect and remit (pay) to the CRA.

Amounts withheld or deducted by a platform may be expenses that you are entitled to deduct from your income when calculating your tax payable. The GST/HST paid on such expenses may also qualify for an input tax credit. Individual situations may vary. Understand your ridesharing agreement, and keep a copy of it in your records.

If the combination of income from ridesharing services and other taxable sales is more than $30,000, you must collect and remit (pay) GST/HST to the CRA on all of your sales (not only on the income from ridesharing services).

For more information on your GST/HST obligations, go to GST/HST and Commercial Ridesharing Services.

Accommodation sharing

Accommodation sharing is renting part or all of a property for a short period. It can include your primary or secondary residence. It also includes any rentals facilitated by a third party, a website, or an application.

Income tax implications

All income you receive from an accommodation sharing arrangement is subject to income tax. Also, your income from accommodation sharing may be considered as rental income from a property or a business.

To determine the type of income you earned, consider the number and types of services you provide for your tenants. In most cases, you are earning income from property if you rent space and only provide basic services. Basic services include heat, light, parking, and laundry facilities. If you provide additional services to tenants, such as cleaning, security, and meals, you may be carrying on a business. The more services you provide, the greater the chance that your rental operation is a business.

Rental income you receive from renting a property or from accommodation sharing has to be reported on your income tax and benefit return, and you have to file Form T776, Statement of Real Estate Rentals. For help on filing a statement of rental income and expenses, go to Completing Form T776, Statement of Real Estate Rentals.

For your rental income from a business, you must report the income you receive from renting a property or accommodation sharing on your income tax and benefit return, and you have to file Form T2125, Statement of Business or Professional Activities. For information on how to complete that form, go to How to fill in Form T2125, Form T2042, or Form T2121.

When you change the use of a property or part of a property (for example, from using it personally to renting it out or vice versa), there may be tax implications. For more information, see Changes in use.

Depending on the facts of a situation, tax implications can vary.

Quebec residents

If you live in Quebec, you may want to consult Revenu Québec’s brochure on Individuals and Rental Income for information on the tax treatment of income and expenses related to rental income.

How to deduct rental expenses

Generally, you can deduct any reasonable expenses you incur to earn rental income. However, when you rent only part of a building, such as a room in your house, you can claim only the expenses that relate to the rented part of the building.

To calculate the part you can deduct, use a reasonable basis, such as the area of the available rental space divided by the total area of your home. Taking this amount, multiply it by the percentage of time the space has been rented in a year, then by the total amount of each expense you are claiming.

Example

If your annual electricity bill for your entire home is $1,000 and you rent out a room in your home for three months, you cannot deduct the full $1,000 as an expense. If the area being rented makes up 10% of the area of your home and the room was rented for three months, then the allowable expense would be $25 (10% x 3/12 x $1,000 = $25).

We recommend that you keep detailed records of all rental income you earn and any expenses you incur to earn that income, because the CRA may ask to see them.

For more information, go to Expenses you can deduct.

Goods and services tax / harmonized sales tax (GST/HST) implications

Accommodation sharing falls under short-term accommodation, defined as a rental where the period of continuous occupancy is less than one month. Rentals of residential premises for periods of continuous occupancy of one month or more are exempt from GST/HST.

If you are a small supplier who earns less than $30,000 of gross revenue from accommodation sharing, you may voluntarily register to take advantage of the related input tax credits (prorated in the same way as the expenses that are deducted for income tax purposes).

Notes

If you are registered for GST/HST, you have to collect and remit (pay) that tax to the CRA on your short-term accommodation revenues, even if they are not more than $30,000.

If you have income from both accommodation and ridesharing services, and it is not more than $30,000, you only have to collect GST/HST on the ridesharing income.

For more information on GST/HST registration, go to Registering for a GST/HST account.

As of July 1, 2021, accommodation platform operators may have new GST/HST responsibilities for short-term accommodation supplies that they facilitate on behalf of hosts who are not registered for the GST/HST. More information is available at GST/HST for digital economy businesses: Overview.

Revenu Québec administers GST and Quebec sales tax in the Province of Quebec. For more information about GST and QST registration, go to Registering for the GST and QST. If your establishment is located in Quebec, you may also have to register for the tax on lodging. For more information, go to Registering for the Tax on Lodging.

Gig Economy

“Gig economy” usually refers to services provided through freelance work or short-term contracts, as opposed to permanent jobs. In a gig economy, companies tend to hire independent contractors and freelancers, often through online platforms or apps. These workers are typically considered to be self-employed instead of employees.

The contracted services can range from a micro-task (a small task set up through the Internet) to specialized services. They can include anything from moving services and home repairs to graphic design, writing and translation or consulting and legal services. In addition, in the gig economy, work may be carried out anywhere, as online platforms can connect businesses and independent contractors from all over the world.

Note

The gig economy, which is based on services, is different from the sharing economy, where income is earned from underused assets such as a room in a home, a vehicle, machinery or equipment.

Income tax obligations

As a resident of Canada, you are required to report your income from all sources on your T1 income tax and benefit return and Form T2125, Statement of Business and Professional Activities. This applies to all your income, including any income you earn inside and outside of Canada. If you are incorporated, report your income by completing the T2 corporation income tax return and including Schedule 125 Income Statement Information.

If you paid foreign income tax, you could be eligible for a tax credit. Individuals claiming this credit should use Form T2209, Federal Foreign Tax Credits. Corporations claiming this credit must complete Schedule 21, T2SCH21 Federal and Provincial or Territorial Foreign Income Tax Credits and Federal Logging Tax Credit. For more information, see Income Tax Folio S5-F2-C1, Foreign Tax Credit.

You can claim eligible Business expenses relating to income you earned through the gig economy. To claim expenses, you must maintain proper books and records, including:

Keeping records of all your purchases will ensure you can substantiate the expenses you claim on your tax return. To learn what qualifies as an eligible business expense, go to Business expenses.

For information about your responsibilities associated with keeping records, go to canada.ca/taxes-records.

GST/HST obligations

You may be required to collect and remit (pay) GST/HST on your sales and services. This depends on the location of the business you are completing work for, as well as the type of work you are providing. As a resident of Canada, you must register for the GST/HST if your revenue from taxable supplies (including zero-rated supplies) of goods and services, made inside and outside of Canada by you and your associates, is more than $30,000 in a calendar quarter or over the last four consecutive calendar quarters.

For information on when you must register for GST/HST, please see When to register and start charging GST/HST. For more information on your GST/HST reporting requirements, go to General Guide for GST/HST Registrants.

If you are a GST/HST registrant, you may be eligible to claim the GST/HST paid on purchases and expenses related to your commercial activities as an input tax credit (ITC). For more information, see Calculate input tax credits – ITC eligibility percentage.

A tax professional can advise you on your tax obligations.

Peer-to-peer (P2P)

Peer-to-peer transactions involve the selling of goods from one person or party directly to another. It includes situations where the seller and buyer connect through digital platforms like websites, online marketplaces and mobile applications.

Income tax obligations

The income tax implications of a peer-to-peer (P2P) transaction will depend on whether you are carrying on a business. As a resident of Canada, if you are earning business income from P2P transactions, you are required to report your income from all sources inside and outside of Canada on your T1 income tax and benefit return and complete Form T2125, Statement of Business and Professional Activities. If you are incorporated, report your income from all sources inside and outside of Canada using the T2 corporation income tax return and complete Schedule T2SCH125, Income Statement Information.

If you paid foreign income tax, you could be eligible for a tax credit. Individuals claiming this credit should use Form T2209, Federal Foreign Tax Credits. Corporations claiming this credit must complete Schedule 21, T2SCH21 Federal and Provincial or Territorial Foreign Income Tax Credits and Federal Logging Tax Credit. For more information, see Income Tax Folio S5-F2-C1, Foreign Tax Credit.

A peer-to-peer sale may be considered to be a disposition of personal-use property. For the income tax implications of personal-use property, please see Personal-use property - Canada.ca.

It is important to maintain proper books and records of all your sales and expenses. This applies to sales you make to buyers in Canada and other countries.

Keep records of all your purchases as you can claim eligible Business expenses on your tax return. For example, expenses incurred for using a platform to sell your products or to direct potential customers to your online store or website could be considered eligible expenses because these are incurred for the purposes of earning income. Eligible expenses could also include costs incurred for the purchase of materials or services inside or outside of Canada (for example, raw products like paints, wool, beads or wood; services such as editing or translation; software licenses, and more).

For information about your responsibilities associated with keeping records, go to Keeping records.

GST/HST obligations

As a resident of Canada, you must register for GST/HST if your revenue from taxable supplies (including zero-rated supplies) of goods and services, made inside and outside of Canada by you and your associates, is more than $30,000 in a calendar quarter or over the last four consecutive calendar quarters.

For information on when you must register for GST/HST, go to When to register and start charging GST/HST. For information on your GST/HST reporting requirements, go to General Guide for GST/HST Registrants.

If you are a GST/HST registrant, you may be eligible to claim input tax credits (ITCs) on purchases made in relation to your commercial activities. You can claim an ITC only when you have paid the GST/HST (or it is payable) for your business activities. For more information, see Calculate input tax credits – ITC eligibility percentage.

A tax professional can advise you on your tax obligations.

As of July 1, 2021, distribution platform operators in respect of qualifying tangible personal property supplies may have new GST/HST responsibilities for those supplies that they facilitate on behalf of sellers who are not registered for the GST/HST. More information is available at GST/HST for digital economy businesses: Overview.

Social media influencers

Influencers use social media platforms to make regular posts on their channels (such as YouTube, Instagram, Twitch, Facebook, Twitter, or a blog). They usually attract a number of followers who use the same platforms and pay close attention to the influencers’ content. Influencers can motivate their followers to buy products or services through the promotions and recommendations they make on their social media channels.

Income tax implications

If you are carrying on a business through your social media channels, you must report the income (both monetary and non-monetary (barter transactions)) that you earn through these activities on either your income tax and benefit return or your T2 corporation income tax return. The CRA will generally consider your social media activities to be business activities where there is an element of profit to your activities and they are undertaken in a sufficiently organized and commercial manner.

You can earn income through several means, both monetary and non-monetary, including but not limited to:

Business expenses

If the income you make from social media activities is considered business income, you may be able to deduct eligible business expenses to reduce tax owing. Expenses will generally be deductible where they are incurred for the purpose of earning income from your social media activities, are not personal expenses, are reasonable in the circumstances and you can substantiate them. To learn what qualifies as an eligible business expense, go to Business expenses. You must report these expenses on either your income tax and benefit return, along with a completed Form T2125, Statement of Business or Professional Activities, or on your T2 corporation income tax return. In addition, the amount you can deduct in a year for an expense depends if it is considered a current year expense or capital expense. For more information, go to Current or capital expenses.

GST/HST implications

Generally, social media influencers whose taxable supplies are $30,000 or more must register for GST/HST. Several factors need to be considered to determine if you are required to register for, collect, and remit (pay) GST/HST to the CRA on taxable supplies generated through social media. For more information, go to General Information for GST/HST Registrants.

You may want to consult a tax preparer to make sure you understand your tax obligations.

How to correct your tax affairs

If you did not report your income from platform sales, you may have to pay penalties and interest. By correcting your tax affairs voluntarily, you may avoid or reduce penalties and interest.

To correct your tax affairs (including corrections to GST/HST returns) and report income that you did not report in previous years, you can ask for a change to your income tax and benefit return, adjust a GST/HST return, or submit an application through the Voluntary Disclosures Program.

To qualify for the Voluntary Disclosures Program, your application has to meet the following conditions:

For more information

If you need more information, please call the CRA.

Individual tax enquiries line: 1-800-959-8281

Business enquiries line: 1-800-959-5525

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