Items and Services Tax or GST is a consumption tax that’s charged on many products or services sold within Canada, regardless of where your company is located. Susceptible to certain exceptions, all businesses are needed to charge GST, currently at 5%, plus applicable provincial sales taxes. A small business effectively represents a realtor for Revenue Canada by collecting the required taxes and remitting them on the periodic basis. Organizations are also allowed to claim the required taxes paid on expenses incurred that relate for their business activities. They are referred to as Input Tax Credits.
Does Your organization Need to Register? Before starting virtually any commercial activity in Canada, all business people have to decide how the GST and relevant provincial taxes apply to them. Essentially, all companies that sell products or services in Canada, for profit, have to charge GST, with the exception of these circumstances:
Estimated sales for your business for 4 consecutive calendar quarters is required to get less than $30,000. Revenue Canada views these firms as small suppliers plus they are therefore exempt.
The company activity is GST exempt. Exempt products and services includes residential land and property, day care services, most health and medical services etc.
Although a smaller supplier, i.e. a business with annual sales lower than $30,000 isn’t needed to file for GST, in some cases it really is good for accomplish that. Since a small business is only able to claim Input Tax Credits (GST paid on expenses) should they be registered, companies, particularly in the start-up phase where expenses exceed sales, might find actually able to recover a great deal of taxes. This has to be balanced up against the potential competitive advantage achieved from not charging the GST, as well as the additional administrative costs (hassle) from having to file returns.
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