Compliance in the sharing economy

Sharing economy

The sharing economy connects individuals or businesses that are looking for a particular product or service to those that have it. Sharing economy arrangements are generally booked using online platforms through a third party, using a website or a software application.

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

  • accommodation sharing: renting out homes, rooms, cottages
  • transportation: ride-sharing, rentals of bikes, boats
  • space rentals: gardens, desks, workspaces, laboratories
  • making and selling goods: household goods, jewelry, beauty products, food, meals
  • providing services: esthetics services, animal care, freelance professional expertise

Reporting money earned through the sharing economy

If you earn money from the sharing economy, you must declare your earnings and can claim eligible expenses on your income tax and benefit return. You also need to keep records of:

  • how much money you made
  • details about when, how, and where you made the money
  • expenses you incurred in making the money. You may be able to claim some of your expenses (for example, your gas, if you used your car to transport others)

A tax professional can advise you on whether to report your income as an incorporated business (using a corporation income tax return) or as an individual (using an income tax and benefit return). You may also be required to register for the goods and services tax / harmonized sales tax (GST/HST).

Collecting GST/HST

If you earn more than $30,000 in gross revenue in a year from products, services, or short-term rentals, you have to register for a GST/HST account and start collecting and sending GST/HST to the Canada Revenue Agency.

If you are earning money from ride-sharing, you will be required to register for GST/HST regardless of whether or not you earn more than $30,000 annually. Please see ride-sharing to review the specific GST/HST requirements for ride sharing as the rules have changed effective July 1st, 2017.

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

  • charge GST/HST when providing a service or a product
  • keep track of the expenses you incurred in providing the service or product and the GST/HST you paid on those things
  • file a GST/HST return and pay the Canada Revenue Agency the GST/HST you collected

If you earn less than $30,000 per year, you can voluntarily register for GST/HST to claim your input tax credits to recover the GST/HST paid on some expenses you had in running your business. This means you will need to charge and send the net GST/HST to the Canada Revenue Agency.

For more information

For more information about your tax reporting obligations, see the Checklist for new small businesses.

If you have questions about money earned through the sharing economy and its tax implications, you can call the enquiries line at the number below.

Enquiries line at 1-800-959-5525

Ride sharing

Ride-sharing 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 (or “app”).

Ride-sharing is one of the largest segments of the emerging sharing economy in Canada.

Changes to the definition of a “taxi business”

Effective July 1, 2017, the definition of a “taxi business” for GST/HST purposes has been changed to include anyone who provides ride-sharing services.

Any transportation that is arranged for, or coordinated through an electronic platform or system, such as a mobile application or website, may fall under the CRA’s specific rules for taxi operators and commercial ride-sharing drivers.

These changes will not apply to a school transportation service for elementary or secondary students or a sightseeing service.

Tax obligations and driving a taxi

As an owner/driver participating in ride-sharing you must be aware of your tax obligations, whether ride-sharing is your only source of income or it is a part-time activity. Check our tax tip Involved in the sharing economy? Know your tax obligations! to get a better understanding of your tax obligations.

Regardless of how much time you spend driving your vehicle for fares, you are now considered to be a taxi in Canada. The GST/HST threshold of $30,000 in gross revenue does not apply and as such, all income earned from driving your taxi, including tips, must be reported on your income tax return and you must also collect and remit GST/HST on all fares.

For more detailed information consult the GST/HST and Commercial Ride-sharing Services infosheet.

Collecting and remitting GST/HST

As a participant in the sharing economy, you may be relying on an application (“app”) or website to collect your fares. It is your responsibility to ensure that you collect and remit GST/HST or that the application platform is collecting and remitting the GST/HST on your behalf.

Use the GST/HST calculator (and rates) to help you calculate the GST/HST you have to collect and remit.

Reporting obligations

It is important to understand your reporting obligations related to sharing economy revenues. Any amounts held back or deducted by the sharing economy platform may be considered as expenses that can be deducted from your income or eligible for an input tax credit for GST/HST purposes. Individual situations may vary.

It is important for you to understand your specific ride-sharing agreement. You may wish to retain a copy of that agreement for your records.

For more information

For more detailed information about your fiscal obligations and their implications, see the Checklist for new small businesses.

Questions about money earned through the sharing economy and its tax implications can be directed to the following:

Enquiries line at 1-800-959-5525.

Accommodation sharing

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

Income tax implications of accommodation sharing

All money you receive as a result of an accommodation sharing arrangement is taxable for income tax purposes and you should report it as rental income when you file your income tax returns. Individual situations vary and the tax implications could be different depending on the specific facts of the situation.

Rental income

Rental income is income earned from renting property that you own or use. Go to Rental income for more details.  For Quebec residents, review the Individuals and Rental Income brochure.

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 could be tax consequences. For more information, go to Changes in use.

How to report rental income on your income tax return

You should report any income you receive from renting property or accommodation sharing on your income tax return and file Form T776, Statement of Real Estate Rentals with the Canada Revenue Agency (CRA). For help on filing a statement of rental income and expenses, go to Completing Form T776, Statement of Real Estate Rentals.

Make sure you keep detailed records of all rental income you earn and any expenses you incur to earn that income in case the CRA asks to see them.

How to deduct rental expenses on your income tax return

Generally, you can deduct any reasonable expenses you incur to earn rental income. However, when you rent only part of a building where you live, such as a room in your house, you can claim only the expenses that relate specifically to the rented part of the building. This means that you have to divide generic expenses for the property on a reasonable basis, such as the percentage of the total living area that is being rented. You also have to divide the expenses in line with the proportion of time the room is rented.

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).

For more information, see Expenses you can deduct.

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

If you earn more than $30,000 of gross revenue over four consecutive calendar quarters through the supply of taxable goods and services, which includes the provision of  short term accommodation, you are required to register and start collecting and remitting the GST/HST. Short term accommodation is defined as 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 or other goods and services, you may voluntarily register to take advantage of the related input tax credits (prorated in the same manner as the expenses that are deducted for income tax purposes).

If you are already registered for GST/HST, you are required to collect and remit GST/HST on your short term accommodation revenues even if they do not exceed $30,000.

For more information on GST/HST registration, go to Registering for a GST/HST account. For information about your specific GST/HST situation, please see the GST/HST Rulings – Experts in GST/HST Legislation contact information.

Revenu Québec administers the GST/QST in the province of Québec.  For more information about GST/QST registration, see Registering for the GST and QST.  Note that if your establishment is located in Québec, you may also have to register for the tax on lodging.  For more information, go to Registering for the Tax on Lodging.

How to correct your tax affairs if you did not report rental (or other) income in past years

If you do not report your rental income, you may have to pay penalties and interest. By correcting your tax affairs you could eliminate or reduce penalties and interest.

To correct your tax affairs and report income that you did not report in previous years, you have two options:

For more information

If you have questions, call 1-800-959-8281.

If you live in Quebec, go to the Revenu Quebec contact page.

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