Goods and Services Tax or GST can be a consumption tax that is charged on most goods and services sold within Canada, wherever your company is located. Be subject to certain exceptions, all companies are required to charge GST, currently at 5%, plus applicable provincial sales taxes. A business effectively works as a real estate agent for Revenue Canada by collecting the taxes and remitting them on a periodic basis. Corporations are also permitted to claim the required taxes paid on expenses incurred that relate with their business activities. They are termed as Input Tax Credits.
Does Your small business Should Register? Just before doing virtually any commercial activity in Canada, all business people should figure out how the GST and relevant provincial taxes affect them. Essentially, all companies that sell products and services in Canada, to make money, are required to charge GST, except in the next circumstances:
Estimated sales for the business for 4 consecutive calendar quarters is required being below $30,000. Revenue Canada views these companies as small suppliers plus they are therefore exempt.
The business activity is GST exempt. Exempt goods and services includes residential land and property, nursery services, most medical and health services etc.
Although a small supplier, i.e. a business with annual sales less than $30,000 isn’t required to launch GST, in some cases it is good to do this. Since a company could only claim Input Tax Credits (GST paid on expenses) if they are registered, many companies, particularly in the launch phase where expenses exceed sales, may find they are able to recover a lot of taxes. This has to be balanced contrary to the potential competitive advantage achieved from not charging the GST, and also the additional administrative costs (hassle) from needing to file returns.
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