The Goods and Services Tax or GST is a consumption tax which is charged of all services and goods sold within Canada, regardless of where your business is located. Subject to certain exceptions, all businesses are required to charge GST, currently at 5%, plus applicable provincial sales taxes. A business effectively serves as an agent for Revenue Canada by collecting the taxes and remitting them on the periodic basis. Organizations are also able to claim the taxes paid on expenses incurred that report with their business activities. They’re termed as Input Tax Credits.
Does Your company Need to Register? Prior to engaging in any kind of commercial activity in Canada, all business owners must determine how the GST and relevant provincial taxes connect with them. Essentially, all businesses that sell products or services in Canada, for profit, must charge GST, except in the subsequent circumstances:
Estimated sales to the business for 4 consecutive calendar quarters is required to be below $30,000. Revenue Canada views these firms as small suppliers and they’re therefore exempt.
The business activity is GST exempt. Exempt products and services includes residential land and property, nursery services, most health and medical services etc.
Although a little supplier, i.e. an enterprise with annual sales less than $30,000 isn’t required to launch GST, sometimes it can be good for do so. Since a small business can only claim Input Tax Credits (GST paid on expenses) when they are registered, many businesses, especially in the start-up phase where expenses exceed sales, might discover that they’re in a position to recover a significant amount of taxes. How’s that for balanced contrary to the potential competitive advantage achieved from not charging the GST, along with the additional administrative costs (hassle) from the need to file returns.
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