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Items and Services Tax or GST can be a consumption tax that is charged on many products or services sold within Canada, where ever your company is located. Subject to certain exceptions, all companies are needed to charge GST, currently at 5%, plus applicable provincial sales taxes. A small business effectively serves as a real estate agent 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 report on their business activities. These are generally referred to as Input Tax Credits.

Does Your company Need to Register? Ahead of starting any type of commercial activity in Canada, all businesses need to decide how the GST and relevant provincial taxes apply to them. Essentially, all companies that sell goods and services in Canada, for profit, must charge GST, with the exception of the next circumstances:

Estimated sales to the business for 4 consecutive calendar quarters is anticipated to be less than $30,000. Revenue Canada views these firms as small suppliers and they’re therefore exempt.



The business enterprise activity is GST exempt. Exempt services and goods includes residential land and property, child care services, most medical and health services etc.
Although a little supplier, i.e. a small business with annual sales under $30,000 isn’t needed to submit GST, in some instances it really is beneficial to do this. Since a business could only claim Input Tax Credits (GST paid on expenses) should they be registered, many companies, particularly in the start-up phase where expenses exceed sales, could find that they are able to recover a lot of taxes. How’s that for balanced contrary to the potential competitive advantage achieved from not charging the GST, as well as the additional administrative costs (hassle) from needing to file returns.

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