Canadian Journal of Law and Technology


Mike Nienhuis


This paper focuses on taxation issues faced by non-resident e-commerce companies with no sustained presence in Canada apart from a web site. The tax liability of foreign corporations with a Canadian subsidiary, a physical Canadian office, or Canadian-based employees or agents will not be considered, even though there is substantial overlap in some of the relevant issues. By e-commerce companies we refer broadly to any firms conducting their primary business — whether business- to-business (B2B) or business-to-consumer (B2C) — by means of the internet.

In the first section we outline the framework for Canada’s taxation of non-residents conducting business in Canada and introduce the value-added taxation of goods and services supplied within the country. Second, we consider one of the most difficult issues that has arisen in connection with the taxation of e-commerce businesses, namely, the characterization of income from e-commerce transactions for tax purposes. The third section looks at Canada’s taxation of a non-resident e- commerce firm’s business profits under Part I of the Income Tax Act and relevant treaty provisions. Fourth, we examine tax liability under Part XIII of the ITA, which concerns withholding tax on certain categories of payments made to non-residents. Finally, in section five we discuss administrative requirements with respect to the taxation of goods and services imposed on non-resident firms conducting e-commerce in Canada.