The Goods and Services Tax or GST is really a consumption tax that’s charged on most goods and services sold within Canada, where ever your small business is located. At the mercy of certain exceptions, all companies are required to charge GST, currently at 5%, plus applicable provincial sales taxes. An enterprise effectively acts as a representative for Revenue Canada by collecting the required taxes and remitting them on a periodic basis. Companies are also able to claim the required taxes paid on expenses incurred that relate for their business activities. They’re known as Input Tax Credits.
Does Your organization Have to Register? Before doing any type of commercial activity in Canada, all business people should see how the GST and relevant provincial taxes connect with them. Essentially, all companies that sell products or services in Canada, to make money, are required to charge GST, except in the subsequent circumstances:
Estimated sales for your business for 4 consecutive calendar quarters is required to be below $30,000. Revenue Canada views these businesses as small suppliers and they’re therefore exempt.
The business activity is GST exempt. Exempt goods and services includes residential land and property, child care services, most medical and health services etc.
Although a tiny supplier, i.e. a business with annual sales below $30,000 is not required to launch GST, sometimes it can be best for do so. Since a business is only able to claim Input Tax Credits (GST paid on expenses) if they are registered, many organisations, especially in the start up phase where expenses exceed sales, might discover actually capable 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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