The products and Services Tax or GST is really a consumption tax which is charged on most products or services sold within Canada, regardless of where your enterprise is located. Be subject to certain exceptions, all companies are needed to charge GST, currently at 5%, plus applicable provincial sales taxes. A small business effectively acts as an agent for Revenue Canada by collecting the taxes and remitting them on the periodic basis. Organizations are also permitted claim the required taxes paid on expenses incurred that relate to their business activities. These are called Input Tax Credits.

Does Your Business Need to Register? Just before doing any type of commercial activity in Canada, all business owners must decide how the GST and relevant provincial taxes connect with them. Essentially, all companies that sell services and goods in Canada, for profit, are needed to charge GST, with the exception of these circumstances:

Estimated sales for that business for 4 consecutive calendar quarters is expected being lower than $30,000. Revenue Canada views these lenders 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 tiny supplier, i.e. an enterprise with annual sales lower than $30,000 isn’t needed to produce GST, in some cases it’s good for do so. Since a company is only able to claim Input Tax Credits (GST paid on expenses) if they are registered, many businesses, especially in the start-up phase where expenses exceed sales, could find they are capable to recover a great deal of taxes. This has to be balanced contrary to the potential competitive advantage achieved from not charging the GST, along with the additional administrative costs (hassle) from needing to file returns.

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