The Goods and Services Tax or GST is a consumption tax that’s charged of many products or services sold within Canada, no matter where your small business is located. At the mercy of certain exceptions, every business are required to charge GST, currently at 5%, plus applicable provincial sales taxes. A small business effectively represents an agent for Revenue Canada by collecting the taxes and remitting them on a periodic basis. Corporations are also permitted to claim the taxes paid on expenses incurred that report on their business activities. These are known as Input Tax Credits.
Does Your company Have to Register? Before participating in just about any commercial activity in Canada, all business owners must see how the GST and relevant provincial taxes affect them. Essentially, every business that sell services and goods in Canada, for profit, are needed to charge GST, with the exception of these circumstances:
Estimated sales for that business for 4 consecutive calendar quarters is expected to be under $30,000. Revenue Canada views these lenders as small suppliers and they are therefore exempt.
The company activity is GST exempt. Exempt services and goods includes residential land and property, day care services, most health and medical services etc.
Although a smaller supplier, i.e. a company with annual sales under $30,000 isn’t needed to launch GST, in some cases it’s best for achieve this. Since an enterprise are only able to claim Input Tax Credits (GST paid on expenses) should they be registered, companies, particularly in the set up phase where expenses exceed sales, might find that they are able to recover lots of taxes. This has to be balanced against the potential competitive advantage achieved from not charging the GST, as well as the additional administrative costs (hassle) from the need to file returns.
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