The Goods and Services Tax or GST is really a consumption tax that is certainly charged on many products or services sold within Canada, no matter where your enterprise is located. Be subject to certain exceptions, all companies have to charge GST, currently at 5%, plus applicable provincial sales taxes. A company effectively works as an agent for Revenue Canada by collecting the taxes and remitting them on the periodic basis. Businesses are also allowed to claim the required taxes paid on expenses incurred that relate for their business activities. They’re known as Input Tax Credits.
Does Your Business Should Register? Before engaging in any kind of commercial activity in Canada, all companies should determine how the GST and relevant provincial taxes affect them. Essentially, all companies that sell products and services in Canada, to make money, have to charge GST, with the exception of the next circumstances:
Estimated sales for the business for 4 consecutive calendar quarters is anticipated to get less than $30,000. Revenue Canada views these lenders as small suppliers plus they are therefore exempt.
The company activity is GST exempt. Exempt goods and services 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 below $30,000 is not required to file for GST, occasionally it can be good to do so. Since a company are only able to claim Input Tax Credits (GST paid on expenses) should they be registered, companies, specially in the start up phase where expenses exceed sales, could find that they’re capable of recover a great deal of taxes. This has to be balanced from the potential competitive advantage achieved from not charging the GST, as well as the additional administrative costs (hassle) from being forced to file returns.
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