Items and Services Tax or GST is a consumption tax that’s charged on many products and services sold within Canada, no matter where your enterprise is located. Be subject to certain exceptions, all businesses have to charge GST, currently at 5%, plus applicable provincial sales taxes. A company effectively represents a real estate agent for Revenue Canada by collecting the required taxes and remitting them on a periodic basis. Businesses are also able to claim the taxes paid on expenses incurred that report for their business activities. These are generally called Input Tax Credits.
Does Your company Must Register? Before doing any type of commercial activity in Canada, all companies should decide how the GST and relevant provincial taxes apply to them. Essentially, every business that sell products and services in Canada, for profit, have to charge GST, except in these circumstances:
Estimated sales for the business for 4 consecutive calendar quarters is predicted to be lower than $30,000. Revenue Canada views these firms as small suppliers and they’re 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 little supplier, i.e. a company with annual sales lower than $30,000 is not needed to submit GST, in some cases it can be good to do so. Since a company could only claim Input Tax Credits (GST paid on expenses) should they be registered, companies, especially in the start up phase where expenses exceed sales, might discover that they are in a position to recover a lot of taxes. This has to be balanced up 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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