In the Federal Budget (released March 2017), new tax regulations were introduced in Canada which affect self-employed taxpayers earning income through ride-sharing in the growing on-demand economy. The change might seem small, but the implications are significant. Prior to the budget announcement, ride-share partners/drivers whose gross annual income fell below the $30,000 mark were considered to be “small suppliers” by the Canada Revenue Agency (CRA) and were not required to register for a Business Number or charge, collect or remit GST/HST for ride-sharing fares.
As of July 1, 2017, ride-share partners/drivers are now included in the definition of “taxi business” for GST/HST purposes; they are no longer “small suppliers”. This means that as a ride-share partner/driver, you are now subject to the same GST/HST regulations as taxi operators.
What Do I Need to Do with the CRA?
As of July 1, 2017, ride-share partners/drivers are required to:
- Register for a GST/HST number
- Charge and collect GST/HST
- Report and remit GST/HST collected on your ride-sharing fares
These requirements apply no matter how much income you earn from ride-sharing. Essentially, all fares charged by a ride-share partner/driver are now subject to GST/HST.
How Do I Register for a GST/HST Account?
There are three ways to enroll with Canada Revenue Agency (CRA):
- By telephone – 1-800-959-5525 or
- Via mail/fax to your local tax centre.
You’ll find detailed instructions on how to register for a GST/HST account on the CRA’s Register for a GST/HST Account web page.
Are you already registered? If you’re already registered for a GST/HST account for your ride-share income, you don’t need to register again. If you already have a GST/HST account for another type of business, you may need to make updates to your Business Account. You can contact Canada Revenue Agency (CRA) directly to find out what changes are required, if any.
What is a Reporting Period?
When you set up your GST/HST account with the CRA, you’ll need to choose a reporting period. Your reporting period will determine how many times a year you’ll need to file a GST/HST return. The default reporting period for ride-share partners/drivers is annual, although quarterly and monthly options are available, depending on your gross annual income.
Each reporting period has its advantages and disadvantages. If you choose the annual reporting method, you’ll typically submit your GST/HST return when you file your personal tax return. Your personal tax return is due on April 30th. It’s important to remember that even though your tax return is due June 15th because you’re self-employed, if you have tax owing, you’ll need to pay your taxes by April 30th.
If you choose the quarterly or monthly reporting method, your GST/HST return will be due more often (4 times and 12 times respectively).
How Much GST/HST Do I Need to Charge?
The amount of GST/HST you need to charge and collect on fares varies by province. For example, the GST/HST rate in Ontario is 13%. The current list of provincial GST/HST rates can be found on CRA’s Charge the GST/HST page.
It is important to remember that GST/HST must be charged on the total fare – not on your net earnings/payout. For example, if a total fare is $10.00, GST/HST must be charged/collected on the $10.00, regardless of any fees or expenses you might have.
How Do I Calculate My GST/HST Remittance Amount?
How you calculate the amount of GST/HST to pay to the CRA depends on the method of accounting you choose. You’ll find details on both the Regular Method and the Quick Method on our Accounting Methods for Ride-Share GST/HST page.
How Do I File a GST/HST Return?
You can choose the filing method you prefer with the CRA:
- Online using the GST/HST NETFILE or the My Business Account portal with the Canada Revenue Agency My Business Account
- In person (along with remittance payment) at participating banks and financial institutions
- By mail to the address on the return.