The Goods and Services Tax or GST is often a consumption tax that is charged on many goods and services sold within Canada, no matter where your enterprise is located. At the mercy of certain exceptions, all companies are needed to charge GST, currently at 5%, plus applicable provincial sales taxes. An enterprise effectively represents a realtor for Revenue Canada by collecting the taxes and remitting them with a periodic basis. Corporations are also permitted 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 Must Register? Just before participating in any kind of commercial activity in Canada, all business people have to figure out how the GST and relevant provincial taxes apply to them. Essentially, every business that sell products and services in Canada, for profit, have to charge GST, with the exception of these circumstances:
Estimated sales for the business for 4 consecutive calendar quarters is required being less than $30,000. Revenue Canada views these lenders as small suppliers and they are therefore exempt.
The company activity is GST exempt. Exempt products or services includes residential land and property, day care services, most medical and health services etc.
Although a tiny supplier, i.e. a business with annual sales lower than $30,000 is not needed to launch GST, sometimes it’s good to achieve this. Since an enterprise could only claim Input Tax Credits (GST paid on expenses) should they be registered, many companies, especially in the start-up phase where expenses exceed sales, may find they are in a position to recover a significant amount of taxes. This has to be balanced from the potential competitive advantage achieved from not charging the GST, and also the additional administrative costs (hassle) from having to file returns.
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