Things to know
- The Goods and Services Tax (GST) is a 5% federal value-added tax that applies to most goods and services supplied in Canada.
- The GST is imposed at each stage of production or distribution, and not only on the final supply to the consumer.
- Five provinces have harmonized their provincial sales taxes with the GST to form a single Harmonized Sales Tax (HST). The HST combines the 5% GST with a provincial component to create a single combined rate of 13% (in Ontario) or 15% (in Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland).
- The HST is essentially the GST levied at a higher rate as it is imposed under the same legislation as the GST, follows the same general rules as the GST, uses the same registration number as for GST, and is reported on the same GST/HST return.
Input tax credits
- Most companies that are registered for GST/HST and make taxable supplies of goods and/or services must charge and collect GST/HST on their taxable supplies, but are able to claim an input tax credit (in effect a refund) for any GST/HST which they pay on goods and services they acquire to make their taxable supplies.
- The Province of Quebec imposes the Quebec Sales Tax (QST) at a rate of 9.975%.
- The QST is a value added tax, and generally applies in the same manner as the GST/HST and has its own QST numbers and QST returns.
- The provinces of British Columbia (7%), Manitoba (8%) and Saskatchewan (6%) impose their own provincial sales taxes which generally apply in a similar manner to most U.S. state taxes.
- These taxes are not value added taxes, and generally only apply to supplies of tangible personal property and certain limited taxable services (they are not typically recoverable).
- While tax is levied against the purchaser, the obligation to collect and remit generally falls with the vendor. Starting in 2019, some digital platforms that allows non-resident vendors to supply services and incorporeal movable properties to specified Quebec consumers will be required to collect QST in respect of those supplies made through the digital platform.
- There can be director liability for unremitted GST/HST/PST.
Delivery outside of Canada
- If delivery is deemed to be made outside of Canada, GST/HST may not be required to be charged to the consumer and the consumer may be separately responsible to pay the tax on import (this assessment depends on a number of factors).
Things to do
- Talk to your advisor or refer to the relevant government’s guide to determine your registration requirements.
- Tax registrations can affect how a company does business in Canada, when it has to charge tax, and when it can claim a credit for certain taxes.
- Care should be taken that all required registrations are made, and that you are not registering for taxes that you would not otherwise be required to collect.
- In completing the registration forms, the answers to some of the questions may impact the acceptance of your application and how long the registration process may take.
- Consider consulting a Canadian commodity tax advisor to determine the best way to complete your registration.
- Starting in 2019, some non-resident suppliers and digital platforms will be required to be registered and to collect QST in respect of certain supplies of services and incorporeal movable properties to specified Quebec consumers.
- Once registered, you will be required to file statements on a monthly, quarterly or annual basis, depending upon the volume of sales.