The world of Canadian taxes can be complex, especially for small businesses. One of the most common questions we get is: "Do I need to register for GST/HST?" This blog post will break down the registration rules for small businesses in Canada, so you can determine if it applies to you
What is GST/HST?
GST/HST stands for Goods and Services Tax/Harmonized Sales Tax. It’s a value-added tax (VAT) applied to most goods and services sold in Canada. Businesses that register for GST/HST collect it from their customers and remit it to the Canada Revenue Agency (CRA). In return, they can claim input tax credits (ITCs) for the GST/HST they pay on their business purchases.
Small Supplier Rules: Do You Qualify?
The CRA offers a simplified registration process for small businesses. Here’s how to determine if you qualify as a small supplier and avoid mandatory GST/HST registration:
- Worldwide Taxable Supplies: Your total revenue from taxable supplies (both domestically and internationally) must be less than CAD $30,000 in a single calendar quarter and over the last four consecutive quarters. This includes sales of goods and services subject to GST/HST.
- Zero-Rated Supplies: Important! When calculating your revenue for the threshold, you must include zero-rated supplies such as basic groceries or public transit tickets.
- Exempt Supplies: Businesses that solely provide exempt supplies, like financial services or educational services, generally don’t need to register for GST/HST regardless of their revenue.
Understanding the Threshold: Key Cautions
- Quarterly Threshold: The CAD $30,000 threshold is assessed quarterly, not annually. If your revenue exceeds this amount in any single quarter over the past four, you’ll likely need to register.
- Once Registered, Always Registered: Even if your revenue dips below CAD $30,000 in subsequent quarters, you typically must remain registered for one year.
- Associated Companies: When determining your GST/HST registration threshold, the CRA considers the combined revenue of all your associated businesses. This includes companies you control or have a significant interest in.
Example:
Let’s say you run a bakery that sells bread and pastries (taxable supplies). In the past quarter, your total sales were CAD $28,000. However, you also sold some basic groceries (zero-rated supplies) for an additional CAD $2,000. Since your combined revenue from taxable and zero-rated supplies is CAD $30,000, you might need to register for GST/HST (considering the associated company rule as well).
Still Unsure? Consult a Tax Professional
These guidelines provide a general overview, but there can be complexities. If you’re unsure about your GST/HST registration requirements, it’s always best to consult with a registered tax professional.
How Can CPA Pro Service Assist You?
Our team of tax professionals can navigate the intricacies of associated companies abroad and GST/HST registration. Here’s how we can help:
- Association Assessment: We’ll analyze your situation to determine if the CRA would consider your businesses associated.
- Threshold Compliance: We’ll calculate the combined taxable supplies of both companies to ensure you meet the registration requirements.
- Foreign Tax Implications: We’ll advise on potential double taxation and explore tax treaties or exemptions that might apply.
- Streamlined Registration: We’ll handle the GST/HST registration process for Company A, ensuring accuracy and timeliness.
- Ongoing Support: We’ll provide ongoing guidance on filing GST/HST returns and maximizing ITC opportunities.
For more information on GST/HST registration and other tax matters, visit the Canada Revenue Agency website or contact your local tax professional.
Disclaimer: The information provided in this blog post is general in nature and should not be construed as professional tax advice. Please consult with a qualified tax professional to discuss your specific situation and ensure you comply with all applicable GST/HST regulations.
