The products and Services Tax or GST is really a consumption tax that is charged of many products or services sold within Canada, no matter where your small business is located. Subject to certain exceptions, all businesses must charge GST, currently at 5%, plus applicable provincial sales taxes. An enterprise effectively represents a real estate agent for Revenue Canada by collecting the required taxes and remitting them on a periodic basis. Companies are also permitted claim the required taxes paid on expenses incurred that relate for their business activities. These are called Input Tax Credits.
Does Your Business Should Register? Before participating in any kind of commercial activity in Canada, all businesses should decide how the GST and relevant provincial taxes affect them. Essentially, all companies that sell products and services in Canada, for profit, have to charge GST, except in the next circumstances:
Estimated sales for the business for 4 consecutive calendar quarters is required to become lower than $30,000. Revenue Canada views these businesses as small suppliers and they are therefore exempt.
The company activity is GST exempt. Exempt services and goods includes residential land and property, nursery services, most health and medical services etc.
Although a smaller supplier, i.e. an enterprise with annual sales less than $30,000 is not needed to file for GST, in some cases it can be good for do so. Since a small business can only claim Input Tax Credits (GST paid on expenses) if they’re registered, many organisations, especially in the launch phase where expenses exceed sales, might discover actually in a position to recover lots of taxes. This has to be balanced from 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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