Canada imposes a value-added tax known as the Goods and services tax (“GST”) on the supply of most property and services in Canada. Gst applies at a rate of 5% in all Canadian provinces and territories except for five provinces that have harmonized their provincial retail sales tax (Pst) with the Gst. Ontario is one of the provinces to harmonize, resulting in a harmonized sales tax (“HST”) of 13%.
As a general rule, the Gst/HST is collected throughout the production and distribution chain. businesses at each level of the chain charge Gst/HST on their domestic sales and are generally able to claim a fully refundable credit, known as an “input tax credit”, to recover Gst/HST paid on purchases of goods and services used in the course of doing business.
Persons required to collect and remit Gst/HST must register with the CRA and file Gst/HST returns at the end of each reporting period, remitting the difference between the Gst/HST charged on sales and input tax credits claimed for the period. if the input tax credits exceed the amount of Gst/HST charged on sales in any reporting period, the difference is refunded.
the Gst/HST base is very broad, covering the vast majority of “supplies” made in Canada. A “supply” is the provision of property or a service in any manner. Gst/HST is not payable on a limited number of supplies specifically designated as “zero-rated” supplies (also referred to as “tax-free supplies”) and “exempt” supplies. Zero-rated supplies include basic groceries, agricultural and fishing products, prescription drugs and medical devices. tax-exempt supplies include certain domestic financial services, health care services and educational services. the key difference between zero-rated supplies and exempt supplies is that a person making zero-rated supplies is entitled to recover the Gst it has paid by claiming input tax credits, whereas a person making exempt supplies cannot.
When obtaining a business number with CrA, companies may open accounts for corporate income tax, import/export, payroll deductions as well as Gst/HST
Canada GST/HST Registration
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