Reporting changes for digital platform owners and sellers changed in 2024, are you aware of how the requirements affect you?
On June 22, 2023, new rules and regulations about reporting on short-term rentals received royal assent and affect digital platforms that help sellers generate income, as well as the sellers themselves. These rules are meant to close the gap between what income is earned and what income is reported, ensuring the correct level of taxation is paid. These changes are effective for the 2024 calendar year.
These regulations apply to digital platform operators who provide services such as the sale of goods, rental of properties, rideshare and delivery services as well as personal services.
How does this affect the digital platform owners?
Digital platform providers must now provide detailed information to the CRA on the funds earned by individual sellers who are using their platforms. They must also provide the seller with the same information by January 31st of each year.
Digital platform operators must be able to show they have taken appropriate steps to verify the information they are collecting from the seller, including information collected in respect of entities that are excluded sellers, seller information, and the address of each property listing.
The digital platform providers are required to share the following information:
- Name of seller (first and last name of an individual; legal name of an entity)
- Seller’s primary address
- Each jurisdiction in which the seller is resident for tax purposes
- Seller’s tax identification number (TIN) and jurisdiction in which the TIN was issued, if issued or required to be collected by the jurisdiction of residence of the seller
- Any other TIN for the seller that is available to the platform operator, including jurisdiction of issuance
- Date of birth (for an individual)
- Business registration number (for an entity), if issued or required to be collected by the jurisdiction of residence of the seller
- Any financial account identifiers (for example, bank account numbers) for the seller that are available to the platform operator. In particular, available financial account identifiers should be provided where the seller resides in a reportable jurisdiction or an immovable property with respect to which relevant services are being provided by a seller is located in a reportable jurisdiction
- The name of the holder of the financial account to which the consideration is paid or credited (if different from the name of the seller and if available to the platform operator), along with any other identifying information in respect of that account holder available to the platform operator
- Total consideration paid or credited to the seller in the reporting period in respect of relevant activities (broken down by calendar quarter) and the number of such relevant activities
- Any fees, commissions or taxes withheld or charged by the platform operator (broken down by calendar quarter)
- Where the seller rented real or immovable property:
- The address of each property listing
- If available, the land registration number
- Where available, the number of days each property listing was rented during the reporting period and the type of each property listing
How does this affect the seller?
Because the platform must legally provide the CRA with the total amount you have earned through their platform, you must make sure to report the same levels of income and pay the appropriate tax on these earnings to avoid penalty.
The above measures have been brought in to increase transparency and to shine a light on those sellers who are not compliant with registration, licensing, and other provincial and municipal requirements.
Where sellers were previously able to earn an income without detection, the information provided by the platforms will highlight those who are non-compliant. Where a seller is non-compliant, the CRA will be able to deny expense claims related to their short-term rental properties. Should a seller’s property become compliant part way through the year these expenses would be pro-rated to determine what can and can’t be used as a deductible. For the 2024 tax year, sellers will be deemed compliant for the full year if they have completed all of the applicable registrations and obtained the required licensing and permits by December 31st, 2024.
