Jeremy Scott Tax Law

Jeremy Scott Tax Law | Is PayPal Income Taxable In Canada?

In 2017, the Federal Court of Canada ruled in favor of the Canada Revenue Agency (CRA), enabling them to acquire information from PayPal concerning its business account holders. Many individuals use PayPal, especially those operating online businesses, to easily and safely process payments. When individuals receive money through PayPal, it is necessary for them to pay taxes on this income, but many people previously avoided doing this, hence why the CRA sought this ruling. Discover the answer to “Is PayPal income taxable in Canada?” and see how Jeremy Scott Law can help with any other tax-related queries by calling (902) 403-7201.

What Details Does PayPal Disclose to the CRA?

The above court order states that it is necessary for PayPal to provide the CRA with certain information regarding any of its business account holders who sent or received payments since the beginning of 2014. These details include:

  • The names of any individuals or corporations with a Canadian address who possess business accounts with PayPal.
  • The birth date of any individual who possesses a PayPal business account.
  • The name of the business if the account holder is a corporation instead of an individual.
  • The phone numbers associated with the account.
  • The account holder’s full postal and email address.
  • The account holder’s business and social insurance numbers.
  • The number of received and sent transactions for each year from the beginning of 2014, including the total value of these transactions.

Registering HST or GST Payments

It is necessary for the majority of Canadian businesses to register their HST or GST payments and provide these sums to the state. The CRA requires businesses to record their sales data, subtract any incurred costs from these sales, and pay a proportion of the outstanding amount in taxes.

Small businesses that use PayPal might be eligible for an exemption from these payments, so long as they are a ‘small supplier’ – meaning they sell less than $30,000 worth of goods or services in a year.  It is important to know that this small supplier calculation is complicated and may include sales from related parties.  For those earning close to this figure or over it, registering for HST or GST payments is essential. Additionally, contacting a tax attorney is advisable, as they can help these individuals to avoid significant penalties.   

How Can Individuals Pay Taxes on Their PayPal Income?

Affected PayPal account holders can pay any taxes owed on their PayPal income through the CRA website via Payment Source. Through this platform, PayPal users can easily pay using either a credit or debit card, bank transfer, or any remaining credit on their accounts. To pay their taxes with this method, these individuals can choose the type of tax they wish to pay, complete the online form and choose to pay via PayPal. 

Does PayPal Report Income in Canada?

In Canada, it is necessary for PayPal to share details regarding its business account holders with the CRA. This impacts anyone who sent or received payments from the beginning of 2014. PayPal encourages the owners of these accounts to correctly file their taxes by contacting the CRA. Any individuals that wish to adjust any previously submitted tax returns can do so by participating in the CRA’s Voluntary Disclosure Program. Although it is key to note that this program is unavailable for those individuals who have received enforcement action or collection proceedings from the CRA.

Moreover, PayPal advises business account holders to speak with an attorney. Speaking to a skilled tax lawyer at Jeremy Scott Law, can allow individuals to learn the answer to “Is PayPal income taxable in Canada?” and gain advice on other tax-related issues.

Are All Account Holders Impacted by This Decision?

PayPal notified all the account holders impacted by this decision shortly after the ruling. The decision only affects business account holders and does not affect individuals with a personal account. PayPal’s account holders can check to see which type of account they have by logging in to their accounts and navigating to “Accounts.” From here, if the user has the option to upgrade their account, they have a personal one. Even if an individual closed their business account, it is still necessary for PayPal to share these details with the CRA, so long as the account holder sent or received payments from the start of 2014. 

Does the CRA Share PayPal Users’ Details With Anyone Else?

According to the Income Tax Act, the CRA can only share PayPal users’ details in very limited circumstances. This ensures the protection of PayPal users’ data. These obligations fall under federal laws and the CRA can expect hefty penalties if they breach these.

Key Facts Concerning Tax Obligations for the Self-Employed

Below are some useful facts to consider concerning tax obligations for self-employed individuals:

  • It is necessary for self-employed individuals to report their income from businesses they run by themselves or with one or more partners.
  • It is essential for individuals who own businesses or perform commercial activities to keep thorough records, including original documents. These records ideally outline how much tax the self-employed individual owes and their eligibility for claiming deductions or credits.
  • It is vital to keep the above documents for a minimum of six years so the individual can appropriately respond if investigated by the CRA. In this scenario, the CRA might ask the individual to prove any claims they make for credits or deductions.
  • It might be necessary for individuals who earn income without tax withheld or who do not have sufficient tax withheld for the year to pay their taxes in instalments. This typically happens when individuals have particular pension payments, investments, incoming rent payments, multiple jobs, or self-employed income.   

Discover How an Experienced Tax Lawyer Can Help

Individuals can possibly benefit from contacting a tax lawyer to ensure they remain tax compliant. Speaking to a skilled tax lawyer can enable people to learn the answer to “Is PayPal income taxable in Canada?”, alongside the answer to other common tax-related queries. By correctly filing their taxes, individuals can make sure they avoid significant fines and other penalties. Find out how an experienced and dedicated Canadian tax lawyer can help you by contacting Jeremy Scott Law at (902) 403-7201.