Canada Tax – GST Collection to Start in November

kochubei_valeria · ‎09-15-2021

* Collection of Canada Taxes has begun today, November 15, 2021.

As of July 2021, we are required by Canadian law to collect Goods and Services Tax (GST) and provincial level taxes including Harmonized Sales Tax (HST), Quebec Sales Tax (QST), and Provincial Sales Tax (PST) (we’ll refer to all of these as Canadian Transaction Taxes) when freelancers, agencies, and clients in Canada purchase Upwork services. This applies to fees and subscriptions paid to Upwork and does not apply to services provided by freelancer to client.

We will begin collecting GST/HST and QST numbers beginning September 15, 2021

Upwork is required to collect GST from those who are not registered under the normal GST/HST regime in Canada. As a result, we will begin collecting GST/HST and QST numbers from users who are registered for Canadian Transaction Tax purposes. If you have a valid GST/HST number and a QST Number (for those in Quebec) — and have it on file with us, we don’t have to charge and collect the tax from you.

Please note, users in British Columbia (BC), Sasketchwan (SK), and Manitoba (MB - Dec 2021) will be subject to PST regardless of their GST registration status.

What is GST/HST

Canada’s GST/HST is a type of value-added tax. The Canadian government assesses 5% GST on digital services, including those provided by Upwork, while provincial rates like HST/PST and QST vary by province. A number of Canadian Provinces assess a similar tax in addition to GST/HST.

Canadian tax law requires Upwork (and other foreign marketplace companies) to begin collecting some of these taxes on Upwork fees charged to Canadian freelancers, agencies, and clients who are considered “consumers” in Canada.
You will be considered a consumer if you do NOT have a valid Canadian GST/HST and/or a QST Number (for customers in Quebec) on file with Upwork.
PST may apply to all freelancers, agencies, and clients in BC, SK, and MB

The amount of the taxes will vary depending on which province you reside or do business in. You will be subject to National and Provincial taxes based on your tax address on file. For more information on provincial tax ranges, see our Help article.

Take Action Now - Update your information before tax collection begins in November*

Submit your GST/HST number and QST number and update the legal name of the Taxpayer (as registered for the GST) as soon as possible to avoid being charged tax on Upwork fees.

1. Add your Tax ID

To file your GST/HST andQST number with us, click here.

2. Update your Taxpayer Information

Update the legal name of Taxpayer (as registered for the GST) as soon as possible to avoid being charged tax on Upwork fees.

The legal name of Taxpayer provided must match the name filed for GST ID with Canada authorities or else the number cannot be validated. The validation process could take a couple of days depending on volume, so providing this as early as possible is important.
For freelancers, ensure the name located in the W8-BEN section (found under Settings > Tax Information) matches the name attached to your GST/HST number.
For clients, ensure the Company Name in the Company Details section of your profile (found under the My Info tab) matches the name attached to your GST/HST or QST number.

3. Update your “Tax Residence” address

In order to ensure the proper tax rate is applied, please make sure the address you provided as your tax residence is accurate.

To verify which address(es) you have listed, go to your Profile Settings and ensure your address fields are accurate under both the (1) "Contact Info" and (2) "Tax information" tabs.
You are required to complete the tax residence on the tax information page as a necessary step in order to provide your Tax ID.
GST ID will appear on the Tax Information tab (QST ID will appear for those in Quebec).

If you don’t have a GST/HST or QST number, we will be required to assess the tax on the following for freelancers, agencies, and clients:

Freelancer service fees (not your earnings)
Connects purchases
Membership fees, such as for our Freelancer Plus plan
The payment processing fees you pay for Direct Contracts

Note: Clients will not be charged these taxes on payments made to Freelancers, and Freelancers will not be charged these taxes on earnings, just on payments made to Upwork.

Additionally, for clients - if you don’t have a GST/HST number, we will assess the tax on the following:

Enterprise fees
The cost of a Feature Job (tax will be applied to the cost of post, which is currently $29.99)
The Upwork Conversion fee (this is the fee clients pay to move a relationship off of Upwork).

Upwork will not be collecting or remitting sales tax on the rates freelancers charge to clients. For example, if a client pays a freelancer $200 for a fixed-price contract, the client will not be assessed any GST on the $200.

Collection of Canada taxes will begin in November* 2021

We will provide you with an update here and via email again when the collection of Canada taxes begin. You can add your GST/HST and QST Number at any time beginning September 15, 2021. Your tax ID will need to be validated. Validation can take several days — if entering your number after collection has already begun, we cannot stop collecting until verification is confirmed.

If you add your valid GST/HST Number at a later date, we will stop collecting these taxes at that time. We will submit the taxes collected to the Canadian government and cannot refund taxes that we collected from you unless we can validate that your GST number was valid at the time of transaction. For our users in BC, MB (Dec. 2021), and SK, PST may apply regardless of your GST registration. If you are in BC and provide GST ID, we will not charge GST, however PST may still apply.

All taxes collected by Upwork will be passed on to the Canadian and Provincial governments, as required by Canadian law. You may also want to consult a tax professional for more information on how this new law and its exceptions may affect you and your business.

We’ll also send you an email about this and you can view more information about national and provincial taxes and how GST/HST will be calculated when collections start in this Help article if you're a freelancer and in this Help article if you're a client.

To add your Tax ID, click here.

If you have any questions, please reach out to us.

*Updated on 11/15/21

hkmuk · ‎09-20-2021

Hi Andrea,

I called CRA and asked why people with GST/HST number are not considered a consumer by the Canadian government, and the agent had no idea what it meant. She told me that with or without the GST/HST number, people need to pay GST or HST when paying fees or buying products.

In FAQ, it says"Under the new rule, you cannot claim a credit once GST/HST and QST have been collected because Upwork is a digital company based outside of Canada."

If Upwork collect GST/HST from me and why I can't claim when file tax? Upwork remit the tax (HST, GST, and QST) to CRA, then freelancers in Canada should be able to claim it file the tax refund as usual??

Please advies. Thank you in advance.

kochubei_valeria · ‎09-21-2021

Hi Yuko,

Upwork will not deduct GST/HST for freelancers who provide their GST/HST number because those freelancers will self-assess when filing their tax returns and account for the GST in their returns.
For freelancers who do not provide the GST/HST numbers, Upwork has a tax obligation to collect the taxes and remit to the tax authorities. CRA has published a webpage that explains that "GST/HST paid by the registered customer in such case is not recoverable", you can refer to CRA page here.

Note that we cannot provide specific tax advice. So if you have further questions, we recommend that you consult your local tax advisor.

hkmuk · ‎09-21-2021

Hi,

Thank you for the reply.

However, the link provided does not answer my question about claiming a tax credit.

The following statement in the FAQ about credits is misleading and/or false :

"Under the new rule, you cannot claim a credit once GST/HST and QST have been collected because Upwork is a digital company based outside of Canada"

The section in the linked-to CRA page has been misinterpreted and/or misunderstood. The section you've quoted from is meant to clarify how cross-border companies need to handle the case when a cross-border company incorrectly collects GST/HST from a customer when that customer has already provided their registration number. I've quoted the relevant section below.

The clarification that the linked-to document is providing is that the customer is within their rights to request a refund from the cross-border company in a case of GST/HST collected in error by the cross-border company; and that the cross-border company is not to try to recover the GST/HST collected in error by claiming an input tax credit or rebate application.

In context, the quoted section is: "If the GST/HST registered customer provides their GST/HST registration number and the GST/HST is still charged and collected, the customer is able to request a refund from you. Any GST/HST paid by the registered customer in such cases is not recoverable by claiming an input tax credit or by filing a rebate application for an amount paid as tax paid in error."

ju84321 · ‎09-21-2021

I'm wondering how long does it take to verify a GST number. I submitted my tax ID a week ago and it's still pending verification.

VladimirG · ‎09-22-2021

Hi Julien,

Thank you for posting your question in the Community and for updating your tax information in a timely manner. Please note that it can several days to verify a newly added GST number. You can find more details in the Canada Indirect Taxes Help article.

VladimirG · ‎09-25-2021

Hi Yuko,

Thank you for providing your feedback. We have taken your feedback and will remove the statement which could be misleading. However, with respect to your clarification about "cross-border company is not to try to recover GST/HST collected in error...", as you quoted in the section, CRA refers to "registered customer", which in this case would be the registered freelancers, not Upwork. Cross-border company is not registered under normal GST regimes and not allowed any input tax credit. The quoted section is referring to freelancers, that you will not be able to claim input tax credit on any taxes collected by the cross-border company.

bknights · ‎11-18-2021

I just received an email saying my tax information had been rejected. I've been a sole proprietor in Canada for years. My GST registration is under my business name, not under my personal name. There is no field to add my business name and it will certainly not be my legal name for W8-BEN purposes. This GST roll out was poorly designed and pretty clearly didn't involve soliciting any feedback from Canadian freelancers.

testerspace · ‎11-29-2021

Hi, I submitted tax my GST/HST number and after few weeks got an email that the number could not be validated and I need to submit again. I rechecked and the number was correct. I have mentioned the details as below and ensured Legal name is the one registered with CRA for GST and same as what is in W8-BEN:

Tax Identification (ID)

Legal Taxpayer Name

2xxxxxx Ontario Inc.

GST/HST Number

7xxxxxxxx (This field doesn't allow RT001 to be added at the end, only 9 numbers allowed)

W-8BEN

Legal Name of Taxpayer

2xxxxxx Ontario Inc.

Not sure what I am missing. Any help will be appreciated.

Thanks!

kochubei_valeria · ‎11-30-2021

Brett,

It looks like the issue with your tax information has already been sorted out and you should be all set now. If you have any additional questions, please let us know here or by responding to the support ticket you had about this issue

Shweta,

One of our agents will reach out to you directly and assist with adding your tax number. You'll receive an email notification about a support ticket being created shortly.

bknights · ‎11-30-2021

Hi Valeria,

Yes I should post what I did as it may help others.

In my Revenue Canada GST account under Profile there is an Operating Names section.

In that section I added my legal person name that had been validated by Upwork to my existing sole proprietorship name.

After that I re-submitted my GST number to upwork and it validated.