Do you have to report your Internet business activities?
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On December 2, 2013, the Canada Revenue Agency (CRA) introduced new reporting requirements for corporations with Internet business activities. Corporations earning income from at least one webpage or website are now required to file Schedule 88, Internet Business Activities, along with their income tax return for tax years with a filing due date after December 31, 2014.
Excluded activities
Under the CRA guidelines, corporations are not required to complete Schedule 88 if, in general, their webpage or website does not directly generate income. Examples of webpages and websites not subject to the reporting requirements are:
Corporations affected must indicate the number of webpages or websites from which they earn income, and provide the URL addresses of the five sites or pages that generate the most income. In addition, they must also report the percentage of their total gross revenue generated from the Internet. The CRA has indicated that a reasonable estimate will be acceptable if the exact percentage cannot be determined.
Note that these requirements also apply to self-employed individuals, who must report their Internet business activities on Form T2125, Statement of Business or Professional Activities, to be filed with their personal income tax return. For now, partnerships are not required to report Internet income information separately.
Activities to report
According to the CRA, webpages or websites that generate income should be reported. The following are examples for which the CRA requires a Schedule 88:
- webpages and websites that allow customers to complete and submit an order form, check out a shopping cart or carry out similar transactions;
- online marketplace and auction websites where goods or services are sold, even if they are not operated by the corporation;
- webpages and websites hosted outside of Canada that generate income;
- websites that do not support transactions but encourage customers to call, complete and submit a form, or send an email to make a purchase, place an order or book a reservation;
- websites that earn income from advertising, income programs or traffic generated by the site.
Excluded activities
Under the CRA guidelines, corporations are not required to complete Schedule 88 if, in general, their webpage or website does not directly generate income. Examples of webpages and websites not subject to the reporting requirements are:
- telephone directory websites that list a webpage or website;
- information-only webpages and websites. Like directories or ads, these pages and sites give basic information such as a business name, address and telephone number, and general information about goods or services provided.
However, these conditions mean that many corporations will be required to file this schedule. For example, corporations that do not have a website but created a profile or other page describing their business on blogs, online marketplaces or other portals or directories from which income is earned will be subject to the requirements.
Reporting requirements
Reporting requirements
Corporations affected must indicate the number of webpages or websites from which they earn income, and provide the URL addresses of the five sites or pages that generate the most income. In addition, they must also report the percentage of their total gross revenue generated from the Internet. The CRA has indicated that a reasonable estimate will be acceptable if the exact percentage cannot be determined.
Note that these requirements also apply to self-employed individuals, who must report their Internet business activities on Form T2125, Statement of Business or Professional Activities, to be filed with their personal income tax return. For now, partnerships are not required to report Internet income information separately.
Marco Lobo Pizzati, CPA, CA, DESS Fisc.
Director, Tax Department
Demers Beaulne