The Goods and Services Tax or GST can be a consumption tax that’s charged of all products and services sold within Canada, regardless of where your company is located. Susceptible to certain exceptions, all businesses must charge GST, currently at 5%, plus applicable provincial sales taxes. A small business effectively works as an agent for Revenue Canada by collecting the required taxes and remitting them over a periodic basis. Organizations are also allowed to claim the taxes paid on expenses incurred that relate on their business activities. They are referred to as Input Tax Credits.
Does Your Business Have to Register? Prior to doing virtually any commercial activity in Canada, all business owners must see how the GST and relevant provincial taxes affect them. Essentially, all businesses that sell services and goods in Canada, to make money, are needed to charge GST, with the exception of the next circumstances:
Estimated sales to the business for 4 consecutive calendar quarters is anticipated being less than $30,000. Revenue Canada views these firms as small suppliers and they are generally therefore exempt.
The business activity is GST exempt. Exempt goods and services includes residential land and property, child care services, most health and medical services etc.
Although a small supplier, i.e. a company with annual sales less than $30,000 isn’t needed to submit GST, occasionally it is good for do this. Since an enterprise could only claim Input Tax Credits (GST paid on expenses) if they are registered, many organisations, especially in the set up phase where expenses exceed sales, may find actually able to recover a great deal of taxes. How’s that for balanced against the potential competitive advantage achieved from not charging the GST, as well as the additional administrative costs (hassle) from having to file returns.
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