Items and Services Tax or GST can be a consumption tax which is charged on most goods and services sold within Canada, wherever your business is located. At the mercy of certain exceptions, every business must charge GST, currently at 5%, plus applicable provincial sales taxes. A company effectively works as an agent for Revenue Canada by collecting the required taxes and remitting them over a periodic basis. Companies are also allowed to claim the required taxes paid on expenses incurred that report to their business activities. These are called Input Tax Credits.
Does Your small business Must Register? Prior to engaging in just about any commercial activity in Canada, all companies should figure out how the GST and relevant provincial taxes apply to them. Essentially, every business that sell products and services in Canada, for profit, are required to charge GST, except in these circumstances:
Estimated sales for your business for 4 consecutive calendar quarters is anticipated being below $30,000. Revenue Canada views these businesses as small suppliers plus they are therefore exempt.
The company activity is GST exempt. Exempt goods and services includes residential land and property, child care services, most health and medical services etc.
Although a tiny supplier, i.e. an enterprise with annual sales under $30,000 is not required to launch GST, occasionally it’s best for accomplish that. Since a business is only able to claim Input Tax Credits (GST paid on expenses) should they be registered, many businesses, mainly in the start up phase where expenses exceed sales, might find actually capable of recover a lot of taxes. How’s that for balanced against the potential competitive advantage achieved from not charging the GST, and also the additional administrative costs (hassle) from the need to file returns.
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