Back Taxes: Hst/Gst remittances
HST and GST: How do they affect you?
Everyone in Canada is familiar with being taxed on the purchase of goods and services. Depending on your jurisdiction, this extra amount required to be paid is known either as the goods and services tax (GST) or the harmonized sales tax (HST) (or, the QST in Quebec). However, if you own and operate a business in Canada, HST and GST have an additional meaning, which attaches additional obligations on the business owner.
What is HST and GST?
GST/HST is a tax that applies on most supplies of goods and services made in Canada. While almost everyone has to pay GST/HST on purchases of taxable supplies of goods and services, some individuals are required to charge GST/HST. Generally, GST/HST registrants are required to collect GST/HST on all taxable supplies of goods and services they provide to their customers. Once collected, these registrants are required to file regular GST/HST returns to report and remit that tax to the government.
Should You Register for the GST/HST?
Are you self employed? One is required to become a GST/HST registrant, and thus collect and remit the associated taxes, if he or she or the business provides taxable supplies in Canada, and is not a small supplier. For non-public bodies, a small supplier is a business that earned less than $30,000 in revenue over the last 4 consecutive calendar quarters. Non residents may have to register for GST/HST depending on their situation. If the non resident is carrying on business in Canada, the non resident may have to register and collect. A huge liability could exist and the non resident may not know it. For non remitted HST/GST, interest and penalties could apply and could be substantial. For Canadian residents with unremitted HST/GST, the tax department could freeze / seize the business owner’s bank account.
Remitting Obligations and Due Dates
The Canada Revenue Agency sets out the required remittance due dates for GST/HST registrants. These dates are dependent on the fiscal year and the reporting frequency of each particular business.
- The Fiscal Year. The fiscal year is the financial year of your business. Usually, the fiscal year for GST/HST purposes is the same as the fiscal year for your regular tax reporting purposes. Since fiscal years differ from business to business, GST/HST remittance due dates are not the same for everyone.
- The Reporting Period. Within the fiscal year, the Canada Revenue Agency sets out reporting periods Reporting periods are the frequency in which you have to file your GST/HST returns. For each reporting period within the fiscal year, you are required to prepare and send a GST/HST return showing the amount of GST/HST collected, and the amount paid to your suppliers. While your initial reporting period is usually annual, your subsequent reporting periods are based on the revenue from the sale of taxable supplies of goods and services made in Canada in your previous fiscal year. Currently, if your revenue from the sale of taxable supplies is less than $1,500,000, your reporting period remains annual; if it is between $1,500,000 and $6,000,000, it is quarterly; and in excess of $6,000,000, it is monthly. If you have a monthly or quarterly reporting period, you have to file your GST/HST return and remit any amount owing no later than one month after the end of your reporting period. If you have an annual reporting period, you usually have to file your return and remit any amount owing no later than three months after the end of your fiscal year, subject to exceptions. However, as an annual filer, you may still be required to pay quarterly instalments. If so, they are due no later than the last day of each fiscal quarter. For example, if your fiscal year ends every July 31 and your revenue from the sale of taxable supplies is $3,000,000, you would be required to file quarterly. This would mean that the end of your first reporting period is October 31, making your first GST/HST remittance due date one month later (i.e. November 30).
Penalties and Interest
A penalty will apply to any return that is filed late, unless there is a zero-balance or refund owed. The penalty is calculated as 1% of the amount owing plus the total of 0.25% of the amount owing multiplied by the number of months the return is overdue, to a maximum of 12 months. This amount can be quite substantial. Additionally, interest equal to the basic rate (varying treasury bill rate) plus 4% will be charged on any overdue amount. GST and HST returns can be a complicated subject. Given the business-specific fiscal years, varying reporting periods and dynamic due dates, it is quite common for late payments to occur. The certified accountants at Tax Doctors Canada are ready to help you with your GST/HST reporting obligations. If you are unsure about your HST/GST requirements, call Tax Doctors Canada.
Do not hesitate any longer, call toll free at 1 855 TAX DOCS (855 829 3627) or use our convenient contact web form on this page for a free no obligation consultation regarding all your business tax filing needs. The professional accountants at Tax Doctors Canada can negotiate a settlement for you with the tax department and possibly save you interest, penalties and prosecution. There are Tax Doctors Canada locations in Mississauga, Toronto and Markham to serve you.
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