For 2013 and subsequent taxation years, corporations will be required to disclose the income earned from any web pages or websites they administer. The percentage of the corporation's gross revenue generated from the Internet must be reported on the recently released Schedule 88 for T2 Corporation Income Tax Returns.
The CRA identified several situations that may suggest a vendor earns income from web pages or websites:
- The vendor sells goods and/or services on a website. The vendor may provide a "shopping cart" and process payment transactions, or use a third-party service to process transactions
- Customers call, complete and submit a form or email the vendor to make purchases, orders, bookings, etc.
- The vendor sells goods and/or services on auction, marketplace or similar websites operated by others
- The vendor earns income from advertising, income programs or
traffic that a site generates. For example:
- static advertisements placed on the site for other businesses;
- advertising programs such as Google AdSense or Microsoft adCenter.
The CRA also noted that taxpayers are required to file Schedule 88 if they have created a profile or other page describing their business on blogs, auction sites, online marketplaces or any other web-based portal or directory that generates income.
The form requires corporations to indicate the number of websites that generate income, provide the addresses of the top five websites that generate revenue for the business and list the percentage of gross revenue generated from Internet activities. This information must be tracked on an ongoing basis to comply with these requirements.
Currently, Schedule 88 is not available with commercial corporate tax preparation software. It is unclear whether the CRA will require corporations to paper file this form separately, since it is not available for electronic filing. It is also not yet clear whether corporations that have already filed their 2013 returns will be required to go back and complete this schedule.
There is an identical reporting requirement for individuals on the T2125 Statement of Business or Professional Activities schedule that is part of the 2013 T1 Income Tax and Benefit Returns. This requirement is part of the current T2125 form and should be completed when filing 2013 T1 Income Tax and Benefit Returns.
These new reporting requirements appear to be very broad in their application. We are hopeful that the CRA will provide further guidance as to how they may affect taxpayers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.