The Goods and Services Tax or GST can be a consumption tax that is charged on many goods and services sold within Canada, no matter where your business is located. Subject to certain exceptions, every business are required to charge GST, currently at 5%, plus applicable provincial sales taxes. A business effectively serves as a representative for Revenue Canada by collecting the required taxes and remitting them with a periodic basis. Companies are also permitted claim the required taxes paid on expenses incurred that report with their business activities. They’re referred to as Input Tax Credits.
Does Your Business Have to Register? Ahead of starting any kind of commercial activity in Canada, all businesses should see how the GST and relevant provincial taxes sign up for them. Essentially, all companies that sell goods and services in Canada, for profit, have to charge GST, with the exception of the next circumstances:
Estimated sales for your business for 4 consecutive calendar quarters is required being lower than $30,000. Revenue Canada views these lenders as small suppliers and they are therefore exempt.
The business activity is GST exempt. Exempt goods and services includes residential land and property, day care services, most medical and health services etc.
Although a little supplier, i.e. an enterprise with annual sales lower than $30,000 isn’t required to launch GST, occasionally it can be good to do this. Since an enterprise could only claim Input Tax Credits (GST paid on expenses) should they be registered, many companies, particularly in the launch phase where expenses exceed sales, may find they are capable to recover a lot of taxes. This has to be balanced contrary to the potential competitive advantage achieved from not charging the GST, plus the additional administrative costs (hassle) from having to file returns.
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