Compliance in the platform economy

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Introduction

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

The 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 – Leveraging personal assets to earn revenue (e.g., Airbnb, Canada Stays, Uber, Lyft)
  2. Gig economy – Short-term or short contract-based work (e.g., Clickworker, Crowdsource, Fiverr)Upcoming
  3. Peer-to-Peer (P2P) – Selling of goods and services from one person directly to another (e.g., Etsy, eBay, Craigslist)Upcoming
  4. Social media (or Social influencers) – Income earned through the use of social media platforms via advertisement revenue, subscriptions, product placement, product promotion. (e.g., YouTube, Instagram, Twitch)

Understanding your tax obligations

The platforms listed above are the more well-known ones. You could, however, be earning income from a platform not listed above. If you provide goods or services through any platform, it is important that you be aware of your tax obligations, both for income tax and goods and services tax / harmonized sales tax (GST/HST).

Income tax implications

As a participant in the platform economy, you are likely considered to be self-employed, and therefore have different tax obligations than if you were an employee.

If you are self-employed, you are required to:

  • Pay tax on income earned from taxable activities when filing your income tax return as taxes are not withheld from your pay. A tax professional can advise you on how to file your income tax return. Also, if you owe a certain amount of taxes at the end of the year, the CRA will ask you to begin remitting those taxes at regular intervals throughout the year in future years.
  • File Form T2125, Statement of Business or Professional Activities to report your self-employment income. When completing Form T2125, you will need to identify the industry code that best describes your main business activity; Relevant industry codes for the sharing economy are provided in the section below. For information on how to complete Form T2125, please consult How to fill in Form T2125, Form T2042, or Form T2121.
  • Contribute to the Canada Pension Plan (CPP). Every person (with some, rare, exceptions) over the age of 18 who works in Canada outside Quebec and earns more than $3,500 per year must contribute to the CPP. As a self-employed individual, you pay both the employer and employee portions of the Canada Pension Plan (CPP) contributions (or the Quebec Pension Plan (QPP) if you are a resident of Quebec) when filing your T1 income tax and benefit return using Schedule 8, CPP Contributions on Self-Employment and Other Earnings. Remember that CPP/QPP payments will now increase your pension amounts when you retire. For Quebec residents, please see You are a self-employed worker (Retraite Quebec).
  • Keep records of all your transactions so that you are able to support your income and expense claims. For more information on which types of records must be maintained, please see Business records.
  • Report taxable income from all sources. Income is money earned through employment, self-employment, investments or benefits. Reporting all of your taxable income benefits you by:
    • increasing your contribution limits to RRSPs
    • increasing your potential maximum amount for a mortgage or loan

You can claim eligible expenses on your income tax return. To do this, you 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, as you may be able to claim certain expenses. For example, you may be able to claim a percentage of your gas if you used your car to earn income providing ride-sharing services.

GST/HST implications

The following table outlines 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 request your GST/HST account (or up to 30 days before that day).
You exceed the $30,000 threshold in a single calendar quarter. You are no longer a small supplier and have to charge GST/HST on the supply that made you exceed $30,000 within the calendar quarter. You must register for the GST/HST.
Your effective date of registration is not later than the day 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 4 (or fewer) consecutive calendar quarters (but not in a single 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 for the GST/HST. 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 starting on your effective date of registration.
  • If you are a small supplier who earns less than $30,000 of gross revenue on taxable sales made in Canada, 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 even if they do not exceed $30,000.
  • If you are earning money from ride-sharing, you are required to register for GST/HST regardless of whether or not you earn more than $30,000 annually from your ride-sharing activities. Please see ride-sharing to review the specific GST/HST requirements as the rules changed effective July 1, 2017.

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

  • charge GST/HST when providing a taxable service or product
  • keep track of the expenses you incurred in providing the service or product and the GST/HST you paid on these expenses
  • file a GST/HST return and remit to the CRA the net GST/HST that you collected

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

For more information about your tax obligations and their implications, see the Checklist for new small businesses. If you live in Quebec, your reporting requirements may be different, as you need to report to both 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 or businesses that are looking for a particular product or service to those that have it. Arrangements are generally booked using online platforms through a third party, using a website or a software application. The sharing economy includes everyone from individuals looking to earn a bit of money from performing a task a few hours a week, to businesses looking to tap into the market of individuals who are registered with the third party.

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

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”).

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. A taxi business includes any transportation of passengers for fares that is arranged for, or coordinated through an electronic platform or system.

For specific rules on transportation services that fall under the CRA definition of a “taxi business” please go to GST/HST information for taxi operators and commercial ride-sharing drivers.

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 small supplier threshold of $30,000 in gross revenue on sales made in Canada does not apply to taxi businesses. As a result, you must collect and remit GST/HST on all fares. All income earned from driving your vehicle for ride-sharing purposes, including tips, must be reported on your income tax return.

With your income tax return, you are required to fill in Form T2125, Statement of Business or Professional Activities. When completing Form T2125, please use the industry “Taxi service”, which is code 485310 if you drive an automobile (except a limousine). If you drive a limousine, please indicate “Limousine service”, which is code 485320. For information on how to fill in Form T2125, please consult How to fill in Form T2125, Form T2042, or Form T2121.

As an owner/driver participating in the ride-sharing industry, you may be relying on an application or website to collect your fares. It is your responsibility to ensure that you collect and remit GST/HST or that the GST/HST is collected and remitted 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.

In addition, any amounts held back or deducted by the platform may be expenses that you are entitled to deduct from your income in computing your taxes payable. The GST/HST paid on these expenses may also qualify 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. Retain a copy of that agreement for your records.

For more information on your GST/HST obligations, please consult the infosheet on GST/HST and Commercial Ride-sharing 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, or part of your residence. It also includes any rentals facilitated by a third party, a website, or an application.

Income tax implications

All money you receive as a result of an accommodation sharing arrangement is taxable for income tax purposes. Your accommodation sharing could be rental or business income.

To determine whether your income is from property or from business, 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 provide basic services only. 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.

For rental income, you must 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 your return. For help on filing a statement of rental income and expenses, go to Completing Form T776, Statement of Real Estate Rentals.

For information on how to fill in Form T2125, please consult 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, please see Changes in use.

Individual situations vary and the tax implications could differ depending on the specific facts of the situation.

Quebec residents

If you live in Quebec, you may wish to consult the Revenu Québec Individuals and Rental Income brochure as it provides 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 specifically 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.

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 as the CRA may ask to see them.

For more information, see Expenses you can deduct.

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

Accommodation sharing falls under “short term accommodations”, which can be defined as rentals 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 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. Note: This rule may not be applicable to you if you only registered for GST/HST as a result of providing ride-sharing services. Although you would be required to collect and remit GST/HST on income relating to ride-sharing services, if the combination of accommodation and ride-sharing services does not exceed $30,000, you are only required to remit GST/HST on the ride-sharing income, not the accommodation income.

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

Revenu Québec administers the GST/QST in the province of Quebec. For more information about GST/QST registration, see Registering for the GST and QST. Note that 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.

Social media influencers

Social media influencers are people who have built a reputation based on their knowledge and expertise on a particular topic. They make regular posts about that topic on their preferred social media channels (such as YouTube, Instagram, Twitch, Facebook, Twitter, through a blog, etc.,) and attract a number of followers who pay close attention to their content. Influencers have the ability to influence their followers to buy products or services by promoting or recommending them on their social media channel(s).

Income tax implications

If your social media channel is a source of income for you, the Canada Revenue Agency (CRA) considers it a business activity. As such, you must report all income (both monetary and non-monetary) that you earn through social media channels on either your income tax and benefit return (T1) or corporate income tax return (T2).

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

  • subscriptions to your channel(s)
  • advertising (both as clickbait and brand advertisements)
  • sponsorships
  • calls to action
  • merchandise sales
  • tips
  • gifts
  • donations
  • trips; and,
  • referral codes

Eligible expenses

Since the income you make from social media is considered business income, you can deduct business expenses to reduce your taxes owing. The expenses you claim must be reasonable and directly related to your income as an influencer. You must report these expenses on your T1 (T2125 Statement of Business or Professional Activities) or T2 return. To see what qualifies as an eligible business expense for a T1 return, go to Business Expenses.

GST/HST implications

Several factors need to be considered to determine if you are required to register for, collect, and remit GST/HST on taxable supplies generated through social media. For more information, go to General Information for GST/HST Registrants.

You may wish to consult a tax preparer to ensure 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 could eliminate 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 request a change to your income tax return, adjust a GST/HST return, or apply for a correction through the Voluntary Disclosures Program (VDP).

In order to qualify for the VDP, you must ensure your application meets the following conditions:

  • be voluntary, which means you make it before you are aware of the CRA taking any compliance action against you or anyone related to you;
  • be complete, which means that you have included all relevant information and documentation (including all returns, forms and schedules needed to correct the error or omission);
  • involve the application of a penalty (or interest for disclosures covered by the GST/HST stream);
  • includes information that is at least one year past due (income tax stream) or one reporting period past due (GST/HST stream) the filing due date; and
  • includes payment of the estimated tax owing.

For more information

If you have questions, please contact the individual tax enquiries line: 1-800-959-8281 or the business enquiries line: 1-800-959-5525.

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