Do you work in the sharing economy? Here’s what you need to know
CRA SOURCE ARTICLE
What is the sharing economy?
In the sharing economy, individuals and businesses share their assets with others for a price. Arrangements are generally made using online platforms through a third party, or using a website or an application (app).
The sharing economy can take a variety of forms, such as:
Transportation: ridesharing, rentals of bikes, boats, other motor equipment
Accommodation sharing: renting out your home, rooms, cottage and more
Space rentals: industrial kitchens, gardens, parking spots, workspaces, or laboratories
Some examples of the types of online platforms considered to be part of the sharing economy include Airbnb, CanadaStays, Uber, and Lyft.
If you earn income by participating in the sharing economy, you need to include this income on your income tax return. You may also have to register for, collect and pay goods and services tax / harmonized sales tax (GST/HST) to the Canada Revenue Agency (CRA) on your sales.
Tax implications for ridesharing
You must report all income earned from driving your vehicle for ridesharing purposes, including tips, on your income tax and benefit return. You must also complete Form T2125, Statement of Business or Professional Activities, and file it with your income tax return.
You must collect and pay the GST/HST to the CRA on all ridesharing fares.
The online platform may collect your fares for you. However, it is your responsibility to make sure that either you collect and remit (pay) the related GST/HST to the CRA or that the GST/HST is collected and sent to the CRA on your behalf.
The amounts withheld or deducted by a platform may be expenses you can deduct from your income when you calculate your tax payable. To learn what qualifies as an eligible business expense, go to business expenses.
Also, the GST/HST you paid on these expenses may qualify for input tax credits. Individual situations may vary.
Tax implications for accommodation sharing
You must report and pay income tax on all of the income you receive from renting a property or from accommodation sharing. Additionally, your income from accommodation sharing may be considered rental income from a property or a business.
For GST/HST purposes, short-term accommodation (i.e. renting for a period of continuous occupancy of less than one month) is taxable. Rentals of residential premises for periods of continuous occupancy of one month or more are exempt from GST/HST. If your accommodation sharing is for less than a month, you may have to register for a GST/HST account. You can get more details on GST/HST registration requirements at find out if you must register for a GST/HST account.
In the province of Québec, Revenu Québec administers the GST and Québec sales tax (QST). If your shared property or accommodation is in Québec, you may have to register for the GST and QST and register for the tax on lodging. You can get more information on how rental income is taxed and what expenses can be claimed by accessing Revenu Québec’s brochure on individuals and rental income.
How to correct your tax affairs
If you did not report your income from the sharing economy, you may have to pay penalties and interest in addition to the tax on the unreported income. By correcting your tax affairs voluntarily, you may avoid or reduce penalties and interest.
To correct your tax affairs (including corrections to GST/HST returns) and report income you did not report in previous years, you may:
Submit an application through the Voluntary Disclosures Program. If accepted, you will receive prosecution relief, and in some cases penalty relief and partial interest relief that you would have otherwise needed to pay.
More information
You can find more information on this topic at taxes and the platform economy.
New rules regarding e-commerce services provided by non-residents in Canada came into effect on July 1, 2021. More information is available at GST/HST for digital economy businesses.
You can learn more about filing your taxes by visiting the links above or by scheduling a free consultation with us.