Items and Services Tax or GST is often a consumption tax which is charged of all products or services sold within Canada, no matter where your small business is located. Subject to certain exceptions, every business have to charge GST, currently at 5%, plus applicable provincial sales taxes. A small business effectively acts as an agent for Revenue Canada by collecting the required taxes and remitting them on the periodic basis. Companies are also allowed to claim the required taxes paid on expenses incurred that report for their business activities. They’re known as Input Tax Credits.
Does Your small business Need to Register? Prior to doing any kind of commercial activity in Canada, all businesses have to see how the GST and relevant provincial taxes affect them. Essentially, all businesses that sell goods and services in Canada, to make money, are needed to charge GST, except in the following circumstances:
Estimated sales for the business for 4 consecutive calendar quarters is anticipated to become lower than $30,000. Revenue Canada views these businesses as small suppliers plus they are therefore exempt.
The business activity is GST exempt. Exempt products or services includes residential land and property, nursery services, most health and medical services etc.
Although a tiny supplier, i.e. an enterprise with annual sales below $30,000 isn’t required to file for GST, sometimes it is good for accomplish that. Since a small business are only able to claim Input Tax Credits (GST paid on expenses) when they are registered, many organisations, mainly in the set up phase where expenses exceed sales, could find actually capable of recover lots of taxes. This has to be balanced contrary to 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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