Category: GST/HST Commentary

The GST/HST Self-Assessment Rules

Jun 20, 2022 by Jeremy

The goods and services tax (GST) and harmonized sales tax (HST) are two important types of tax that the Canada Revenue Agency (CRA) collects. Combined, these taxes bring millions of dollars into the economy each year. One factor that makes GST and HST taxes rather complicated is the requirement for self-assessment. GST/HST self-assessment rules vary depending on the party incurring the cost and the province where the item or expense is to be consumed. If you need help understanding these rules and the requirements, consider contacting Jeremy Scott Law at (902) 403-7201 for legal advice and guidance.

The words self assessment written digitally with a man behind them

What Are the GST and HST Taxes?

 

GST and HST are both sales taxes that are levied in Canada. Both of these taxes are value-added taxes and operate on an input/output system. Taxpayers pay GST or HST tax when they purchase goods or services. Then, when taxpayers sell their product or service, they collect GST or HST from customers. Taxpayers deduct the amount they paid from the amount they collected and remit the difference in these figures to the CRA.

The GST applies nationally. Some provinces have harmonized their provincial sales taxes with the GST to create the HST. The HST operates in a similar fashion as to the GST and typically (with some limited exceptions) applies to the same tax base.

According to the Government of Canada, current GST/HST tax rates are:

  • 15% for HST in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island
  • 13% for HST in Ontario
  • 5% for GST in Alberta, British Columbia, Manitoba, Northwest Territories, Nunavut, Quebec, Saskatchewan, and Yukon

What Is Self-Assessment?

Self-assessment involves calculating the amount of GST or HST that should be paid when an actual sale takes place, but the otherwise applicable tax has not been collected.  Effectively self-assessment involves taxpayers remitting the applicable tax directly to the CRA themselves. Taxpayers who are required to self-assess must generally include this on their GST/HST return, but there are also mechanisms in place for those who do not file returns. GST/HST self-assessment rules can be very complicated. Mistakes can cause issues with the CRA. Due to these potential complications, many taxpayers consult with a tax lawyer such as Jeremy Scott for assistance with this process.

Who Must Self-Assess?

The CRA’s GST/HST self-assessment rules require certain taxpayers to self-assess. Generally, self-assessment rules apply to taxpayers engaged in non-commercial activities when their supplier has not billed them for GST or HST. Self-assessment also applies to taxpayers who are not GST/HST registrants. Additionally, if a taxpayer purchased goods in a province or territory that does not collect HST but then brings those goods into a province that does collect HST, the taxpayer will also likely be required to self-assess. Likewise, self-assessment may be required when a non-registrant makes a purchase of a good within a Canadian province with a lower HST rate and then brings them into a province with a higher HST rate. The importation of commercial goods into a province that collects HST can also trigger the need to self-assess.

Generally, the following taxpayers are subject to these rules:

  • Non-profit organizations
  • Charities
  • Municipalities
  • Universities and public colleges
  • School authorities
  • Hospital authorities
  • Unregistered non-resident suppliers
  • Taxpayers bringing goods into a province that collects HST
  • Taxpayers who import specific commercial goods
  • Taxpayers who acquire intangible personal property and services for use in a province that collects HST
  • Taxpayers importing motor vehicles into Canada when they are brought into a province that collects HST

Requirements to Self-Assess

The requirements to self-assess depend on the type of good or service involved, the province where the goods are imported, and other factors. The self-assessment rules are published in the CRA’s Bulletin B-079. General GST/HST self-assessment rules for the certain taxpayers and tax situations are described below.

Goods and Services Brought into a Province that Collects HST

If a taxpayer purchases goods or services in a province that does not collect HST and brings the goods and services into a province that collects HST, they are usually required to self-assess the provincial portion of the HST. Taxpayers do not have to self-assess if they would be entitled to claim a full tax credit for the GST/HST reported or the assessed tax would be less than $25 in a particular month.

Tangible Personal Property Brought into a Province that Collects HST

The self-assessment rules also apply if a taxpayer purchases goods in a province that collects HST and then brings them into another province that collects HST but that province charges a higher HST rate. In this situation, the taxpayer subtracts the difference between the amount paid and owed for the tax and multiply the figure by what they paid for the property or its fair market value.

Services and Intangible Personal Property Brought

The self-assessment rules also apply to intangible personal property when the taxpayer acquires intangible personal property or a service and use or supply it significantly in provinces where the HST is higher than in the province where it was acquired.

Importation of Vehicles

If a taxpayer imports a vehicle into a province in which HST is collected, they may be required to self-assess.

Non-Registered Taxpayers

 

Taxpayers who are not registered for GST or HST returns generally must self-assess.

Non-Resident Goods Suppliers

Taxpayers who are not registered for GST or HST and purchase something from a non-resident supplier in a province that collects HST, they will have to self-assess.

 

No Billing Vendor or Supplier

 

Taxpayers who are not billed by their vendor or supplier for HST or GST may be required to self-assess.

Additional Rules

There are many complex rules and exceptions related to self-assessment, such as:

  • Taxpayers may have to self-assess if they use a certain percentage of goods or services in a province that collects HST.
  • Taxpayers calculate the GST or HST by determining the type and place of supply. Taxpayers may have to make up the difference in taxes paid and charged in different provinces.
  • Real estate builders will generally pay the GST or HST based off the fair market value of the property.
  • There are certain zero-rated goods, services, or intangible personal property that will not incur the GST or HST.
  • Taxpayers may be required to declare the HST by completing a Return for Self-Assessment of the Provincial Part of the HST.

Contact Jeremy Scott Law for Help

GST/HST self-assessment rules can be complicated. They can affect each taxpayer’s tax situation differently. They also vary according to the province and territory. If you have any questions about these rules or need help with your self-assessment, consider contacting Jeremy Scott Law at (902) 403-7201.

If you found this information valuable, I encourage you to check out my other blog posts.

The Disclaimer:

Please note the content above and throughout this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.  I urge you to seek specific legal advice by contacting me (or your current legal counsel) regarding any legal issues you may face.  I do not warrant or guarantee the quality, accuracy or completeness of any information found on this website and will not be held liable for anything contained in this document or any use you make of it. Finally, accessing the information on my website does not create a lawyer-client relationship.

What Are GST/HST Carousel Schemes?

Jun 14, 2022 by Jeremy
Photograph Description Search GST/HST Goods Services Tax Harmonized Sales Tax button. Modern Banker use internet technologies.

The Canada Revenue Agency (CRA) is responsible for collecting various taxes, including the Goods and Services Tax (GST) and the Harmonized Sales Tax (HST). When the government does not collect the amount of tax it is due, the CRA may begin initiatives (audits and investigations) targeted to collect this missing revenue. One of the latest initiatives is to pursue collection from GST/HST carousel schemes. However, innocent businesses are sometimes identified in these tax campaigns. If you are concerned about being a target of a CRA investigation, consider contacting Jeremy Scott Law at (902) 403-7201.

What Is a GST/HST Carousel Scheme?

The CRA explains that in a GST/HST carousel scheme, a group of businesses collude to set up a fake supply chain to collect GST/HST refunds. The businesses sell non-existent goods or the same goods repeatedly. One of them collects the GST/HST or creates fake documentation to show that they charged GST/HST. However, the business does not remit the collected tax to the government. The last business involved in the supply chain may claim that they have exported the goods offshore. All of the companies (other than that which did not remit the owed tax) then will claim refunds on the tax they purported to pay to the missing trader. This allows them to attempt to profit from GST/HST deductions based on the fake transactions and to which they are not entitled.

In order to create a carousel scheme, goods and services must be imported into the country, transferred to some other businesses, and then exported out of the country. The scheme is complete when a shell company receives an unwarranted refund from the government for tax that it never paid.

Carousel frauds are more common in Eastern Europe where governments lose hundreds of millions of dollars to it every year. However, in recent years, it has become a bigger problem in Canada. Here, the industries most likely to be involved in these schemes tend to be:

  • Scrap gold and refined precious metals
  • Software
  • Media
  • Telecommunications

Infamous GST/HST Carousel Schemes

GST/HST carousel schemes have become a major problem for CRA in recent years, leading to the CRA to improve its ability to detect and prevent them. Some recent instances of GST/HST carousel schemes include:

United Kingdom-Based Scheme Attempts to Obtain $52M in Canadian Tax Refunds

In this scheme, 11 foreign nationals based in Great Britain were able to obtain $4.7 million in GST/HST refunds and rebates before the CRA detected the fraud. The scheme attempted to obtain more than $52 million from fraudulent tax refunds. The CRA conducted raids in Ontario, as did Her Majesty’s Revenue and Customs department. The scheme endured from 2011 to 2015. 11 people set up 84 corporations and falsified bank statements, sales invoices, and other documents to carry out the scheme.

The CRA detected the scam once it noticed similarities for many of the GST/HST returns it received, including:

  • Many of the businesses claimed they were in the telecommunications industry but had little evidence of business activity
  • Many refunds were for $1 million or more
  • The company’s shareholders were not Canadian residents
  • Addresses belonged to virtual offices or post office boxes
  • Many of the businesses failed to file T2 corporate tax returns
  • All of the businesses reported “nil net income”

Over 80 tax investigators executed search warrants at three locations in Ontario and six locations in the United Kingdom.

Targeted Effort Saves Canadian Government $526.4 Million

The CRA reports that it devoted additional audit resources to help identify fraudulent GST/HST refunds from April 1, 2016 to March 31, 2017. These CRA efforts resulted in:

  • More than 70,000 GST/HST audits and examinations
  • The prevention of $1.27 billion in unwarranted GST/HST refunds being issued
  • The denial of more than $223.9 million in refunds
  • $302.4 million in assessments for GST/HST
  • Assessment of $168.1 million for accounts that involved carousel schemes

 

Possible Consequences for Innocent Businesses

While the CRA’s investigative effort can protect the integrity of the economy, the CRA can sometimes cause harm to legitimate businesses. Sometimes, legitimate businesses may unknowingly be used in these schemes. For example, the CRA may not issue a GST/HST refund the business is due and expecting. Instead, it might decide to conduct an audit that takes over a year to complete. The CRA may conduct a thorough investigation that involves validating alleged transactions and reported activity. This can have devastating effects on the business’ cash flow.

The innocent business might receive the goods that were sold within the chain, being completely unaware of any fraud. When businesses find themselves in this situation, they often learn that they are at a disadvantage with the CRA because the CRA investigators may have conducted audits or investigations into other companies. The business usually does not have access to this same information due to confidentiality concerns. If an adverse decision is made against a business, it has the right to appeal the decision. However, this can result in even longer delays and increased legal costs. Additionally, the Excise Tax Act allows the government to impose tax liability on the corporate directors personally.

In addition to potentially losing the very money the business needs to survive, there are even more serious consequences that can befall someone who is believed to have participated in a carousel scheme. The CRA can recommend cases for criminal prosecution if it believes tax laws have been violated. Because the potential consequences are so severe, some people turn to a tax lawyer such as Jeremy Scott Law to understand all of their legal options.

Contact Jeremy Scott Law for a Confidential Consultation

If you are concerned about being implicated in a GST/HST carousel scheme, you might decide to retain the services of a knowledgeable tax lawyer who can review the circumstances surrounding your case, review your tax history, answer questions you have about the audit process, and advise you of a legal strategy. If you are in this situation, consider contacting Jeremy Scott Law at (902) 403-7201. You can arrange a consultation with a tax lawyer, and your information will be kept confidential.

If you found this information valuable, I encourage you to check out my other blog posts.

The Disclaimer:

Please note the content above and throughout this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.  I urge you to seek specific legal advice by contacting me (or your current legal counsel) regarding any legal issues you may face.  I do not warrant or guarantee the quality, accuracy or completeness of any information found on this website and will not be held liable for anything contained in this document or any use you make of it. Finally, accessing the information on my website does not create a lawyer-client relationship.

New GST/HST Rules for Airbnb Properties

Jun 1, 2022 by Jeremy

New GST/HST Rules for Airbnb Properties Come into effect July 1, 2022

The New GST/HST Rules

As a result of changes to the GST/HST legislation, Airbnb is going to adjust how it handles GST/HST effective July 1, 2022.  Under these new rules, GST/HST will apply to all short-term rentals made through the Airbnb platform.  Where the Airbnb Host is registered for GST/HST (and has provided their registration information to Airbnb) the Host will be responsible to report the taxes collected to the Canada Revenue Agency (‘CRA’).  Where the Host is not registered, Airbnb will remit the GST/HST collected directly to the CRA.

There will also be a change to the GST/HST status of the service charges collected by Airbnb from Hosts.  Normally, Airbnb services charges are subject to GST/HST.  As of July 1 2022, however Airbnb will not be required to collect GST/HST on service charges billed to non- registered Hosts.

Requirement to Register for GST/HST

It is important to remember that Hosts have always been required to register for GST/HST if their taxable revenues exceed $30,000 in a 12-month period.  Hosts can not simply ignore the HST and ‘let Airbnb report the tax for them’.  Where a host does not meet the minimum requirements to be required to register for GST/HST they can voluntarily choose to do so. 

Registering for GST/HST will entitle Hosts to claim input tax credits (‘ITCs’) to recover some, and perhaps all, of the GST/HST paid with respect to operating costs and capital purchases associated with their rental property.  The rules relating to input tax credits have not changed because of the new rules. 

Registering for GST/HST will allow Hosts to reduce costs by claiming ITCs.  However, it is important to note that claiming ITCs may impact how GST/HST applies should you choose to change the use of the property at a future point in time.

Long Term GST/HST Implications

Should a Host decide at to reduce, or stop renting the property, GST/HST could apply to this ‘change in use’ of the property. Depending on how the property was used, whether ITCs were claimed (on the property or renovations to the property) and whether the property is a ‘residential complex’ for tax purposes, the liability could be as much as 15% of the fair market value of the property on the date of the change in use.

Get Help from an Experienced Canadian Tax Lawyer Today

Property owners who would like to assistance understanding how GST/HST will apply to their Airbnb properties can contact me at at 902-403-7201 or contact us online . I am happy to provide practical and helpful tax advice.

If you found this information valuable, I encourage you to check out my other blog posts.

The Disclaimer:

Please note the content above and throughout this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.  I urge you to seek specific legal advice by contacting me (or your current legal counsel) regarding any legal issues you may face.  I do not warrant or guarantee the quality, accuracy or completeness of any information found on this website and will not be held liable for anything contained in this document or any use you make of it. Finally, accessing the information on my website does not create a lawyer-client relationship.

VISA Card Intermediaries Exempt From GST/HST Tax

May 11, 2022 by Jeremy

Credit Card Intermediaries and the GST/HST

Canadian businesses are required to register for the goods and services tax (GST) or in some provinces, the harmonized sales tax (HST). Businesses involved with the supply of most types of goods and services in Canada are required to register for the GST or HST. However, certain types of businesses may be exempt from these tax requirements. The Canada Revenue Agency has been challenging some of these exemption claims, but some recent court decisions have sparked optimism among those in the financial services industry. For more information about VISA card intermediaries exempt from the GST/HST tax, contact the Canadian tax lawyers of Jeremy Scott Law at 902-403-7201.

What is the GST/HST Tax in Canada?

In Canada, the GST applies to most supplies of goods and services that originate in Canada. The GST also usually applies to the supply of real properties, such as land and real estate, and intangible personal properties like trademarks, patent-use rights, and digital products. The GST is a federal tax, but certain provinces have combined their provincial taxes with the GST to create the harmonized sales tax (HST), which applies to the same types of goods, services, and properties as the GST. However, the HST rate may vary from province to province.

Businesses that are registered for the GST/HST are required to collect tax on the sales of taxable supplies at the applicable HST rate, or at 5 percent for the GST rate. Nearly everyone in Canada is required to pay the GST/HST when they purchase taxable supplies of property and services – with the exception of specific groups and organizations, including certain provincial and territorial governments.

GST/HST Exempt Financial Services

Financial services are generally considered exempt from the GST/HST, according to subsection 123(1) of the Excise Tax Act. According to this law, most of the services offered by financial institutions are exempt from the GST/HST, including lending money, operating checking accounts, and processing credit and debit card payments. However, many other types of business operations offered by financial institutions are still bound by the GST/HST. In general, business activities that support the delivery of financial services are considered separate from financial services, and thus, taxable. For example, advertising, promotions, administration, and management are usually deemed taxable.

While Canadian tax law allows exemptions for financial services, the Canada Revenue Agency has challenged VISA card intermediaries exempt from the GST/HST tax. The CRA has reportedly classified financial services as taxable promotional, advertisement, or administrative services instead of GST/HST exempt financial services. Financial services providers have argued that the CRA has misclassified their services in order to unfairly collect taxes for services that should legally be considered exempt from the GST/HST.

Zomaron Inc. v. The Queen Court Case

A recent court case called Zomaron Inc. v. The Queen examined the question of exempt services in the Canadian financial sector. Zomaron Inc. is an independent sales organization (ISO) for VISA and a Member Service Provider (MSP) for Mastercard. ISOs and MSPs typically partner with payment processors like Elavon Canada Company (also known as acquirers) to distribute point-of-sale (POS) payment processing services – most commonly POS machines that allow businesses to authorize credit card payments from customers. Zomaron made legal agreements with its acquirers, which granted Zomaron the authority to set terms, pricing, rates, and fees for the use of these machines, along with a complex pricing structure. Merchants that were accepted by the acquirers agreed to pre-negotiated contracts that were binding for both the acquirer and the merchant. Zomaron also had an obligation to provide preparatory and advising services and received a mark-up share for all services provided to the acquirers.

The Canadian Revenue Agency determined that Zomaron’s services should be classified as taxable promotional and advertising services and that these services were not exempt from the GST/HST taxes. The CRA also ruled that Zomaron failed to charge the required GST/HST to the acquirers. This CRA decision was challenged in the court case, and the Tax Court of Canada (TCC) overturned these CRA rulings. The TCC ruled that even though Zomaron had solicited, recruited, trained, and provided ongoing support for POS retailers, Zomaron had technically only arranged for the processing of credit card payments. Legally speaking, Zomaron had only caused the transaction to occur, rather than processed it themselves. Thus, the court ruled that Zomaron’s services should be considered exempt financial services according to the Excise Tax Act.

What Could the Zomaron Ruling Mean for Visa Card Intermediaries?

The Tax Court of Canada’s recent ruling has been celebrated by other non-traditional financial services industry intermediaries, who believe that the decision could set the precedent that other types of intermediaries could be exempt from the GST/HST. For example, other types of point-of-service sellers and co-branded card providers who sell retail cards are commercial chains like Costco may also be deemed as exempt financial service providers. These exemptions could apply to all intermediaries in the consumer-retailer relationship.

This court ruling essentially redefined the notion of “arranging for” financial services, lowering the threshold for meeting this requirement. Thorough documentation remains crucial for receiving this exemption, as the TCC relied on extensive documentation from Zomaron Inc. to make their final ruling.

Contact a Canadian Tax Lawyer to Learn More

Canada’s tax laws are complex, and compliance with these tax laws can be complicated for business owners. While financial services providers may be exempt from the GST/HST for some of the services they offer, providing sufficient documentation to receive these exemptions is not always straightforward. Businesses that fail to provide sufficient evidence for their GST/HST exemption could face serious fines and other penalties from the Canadian Revenue Agency. Due to the complex nature of the Canadian tax system, many businesses that operate within Canada seek assistance from an experienced Canadian tax lawyer. If you have Canada tax questions related to VISA card intermediaries exempt from the GST/HST tax (or other tax concerns), you can learn more about your business’s options by calling Jeremy Scott Law at 902-403-7201.

If you found this information valuable, I encourage you to check out my other blog posts.

The Disclaimer:

Please note the content above and throughout this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.  I urge you to seek specific legal advice by contacting me (or your current legal counsel) regarding any legal issues you may face.  I do not warrant or guarantee the quality, accuracy or completeness of any information found on this website and will not be held liable for anything contained in this document or any use you make of it. Finally, accessing the information on my website does not create a lawyer-client relationship.

CRA Can Now Require Oral Interviews Of Taxpayers

May 2, 2022 by Jeremy

CRA Can Now Require Oral Interviews Of Taxpayers

The Canada Revenue Agency (CRA) has broad powers of audit that allow it to request records, documents, and evidence from taxpayers. Facing a need for increased revenues and a desire to collect unpaid taxes, the Government of Canada expanded these powers in its 2021 Federal Budget. Due to this expansion, the CRA can now require oral interviews of taxpayers, including owner-managers and employees of an affected business. This change could have a dramatic impact on taxpayers. If you have questions about how these changes might affect you or would like to get assistance with an oral interview, consider contacting Jeremy Scott Law at (902) 403-7201.  

Previous Rules

The CRA already had the power to examine taxpayers’ documents or property to determine their potential tax obligations, as well as the right to ask questions about these things. However, the CRA did not have the power to compel oral interviews. Therefore, the CRA only used oral interviews when completing certain types of audits. Previously, the CRA could call for “all reasonable assistance” and responses to “all proper questions,” as provided within the Income Tax Act. In a precedential court ruling, the Federal Court of Appeal denied the CRA the right to subject a taxpayer’s employees to forced interviews.

In application, the CRA did not perform many face-to-face interactions with taxpayers. Instead, the agency would more often confer with taxpayers’ accountants or tax lawyers. Taxpayers could generally answer questions in writing, which gave them an opportunity to review their records, consult with a legal representative, and carefully answer each question.

Reason for Change

The new rules allow the CRA to force interviews and compel answers from both taxpayers and taxpayers’ employees. The change was initiated to make it easier for the CRA to obtain necessary information and issue assessments. Additionally, the expansion was made to supersede an adverse court decision in the case of MNR v. Cameco Corporation. In that case, the CRA asked about 25 Cameco employees to attend oral interviews for the second time. Cameco refused, suggesting that it provide written answers instead. Cameco argued in court that the CRA had no general power to compel oral interviews. The courts agreed with Cameco, finding that the CRA had no general power to compel oral answers to its questions.

Potential Consequences of New Powers Regarding Oral Interviews

The CRA will likely conduct more oral interviews and widen the scope of the interviews. The CRA now has the power to compel people to answer all proper questions and provide reasonable assistance during these proceedings. Taxpayers can be required to answer questions orally or in writing, per the CRA official’s specifications. Those answers could expose taxpayers to penalties, higher assessments, or criminal prosecution. Additionally, the expansion of oral interviews can lead to several significant consequences.

Lack of a Transcript

The oral interviews may occur in informal settings without a court reporter to keep a record of the proceedings. The CRA official and taxpayer may remember these interactions differently. The taxpayer’s answers may, therefore, have serious implications without the benefit of having a transcript available to reference or make arguments from.

Any Person Can Be Interviewed

These oral interviews can be conducted on any “person.” Therefore, a disgruntled former employee or other person with animosity toward the business could potentially be interviewed and have their answers taken seriously by government officials.

Assumptions and Misunderstandings Can Happen

Even if the business owner or employees try to protect the business, they may not have the necessary tax knowledge to answer CRA questions truthfully while also protecting their own rights. CRA officials may commence an oral interview simply looking for details to corroborate the agency’s position, so they might overlook other information refuting that perspective. Simple miscommunications or misunderstandings can potentially lead to adverse conclusions by CRA officials. Some may worry that the CRA will use its expanded powers to gain evidence to use against the business in an audit.

Best Practices for Oral Interviews

While a taxpayer is expected to cooperate with the CRA, he or she can provide this cooperation through means that protect the taxpayer’s rights and limit the scope of the inquiry. The following best practices can help taxpayers with oral interviews.

Gather Records

Before the oral interview, take the time to gather all necessary records and documents that you may need to pull information from, such as:

  • Tax returns
  • Receipts
  • Invoices
  • Business financial statements
  • Previous communications

Prepare the Workspace

Clear the space that will be used for the interview. Make sure the space is private and free of distractions.

Work with a Tax Professional

A tax attorney from Jeremy Scott Law can assist with the oral interview and preparation. A tax lawyer is familiar with tax laws and the scope of oral interviews and audits. A tax professional can guide the taxpayer through the process and help to prepare witnesses. He or she can also attend the oral interview and ensure that the questions are appropriate.

Request the Questions in Advance

Request the questions in advance of the oral interview so that you can gather the necessary information and consult with your tax professional. A tax lawyer can also determine if there are questions that are more technical and should be answered in writing and that the questions are within the scope of the audit.

Prepare for the Oral Interview

Prepare for the interview by preparing your records and rehearsing your answers. Schedule a time with the CRA auditor that is convenient for you, your witnesses, and any representatives.

Review

Review the auditor’s working paper for accuracy and completeness. If you did not have the necessary information to answer a question, follow up in writing after the interview to answer the question.

Contact Jeremy Scott Law for Help with Oral Interviews

Since the CRA can now require oral interviews of taxpayers, businessowners might want to prevent the interviews from occurring in the first place or to carefully prepare for an interview. If you have received notification from the CRA of oral interviews, you might benefit from professional tax advice and assistance. Consider contacting the tax lawyer at Jeremy Scott Law by calling (902) 403-7201.

If you found this information valuable, I encourage you to check out my other blog posts.

The Disclaimer:

Please note the content above and throughout this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.  I urge you to seek specific legal advice by contacting me (or your current legal counsel) regarding any legal issues you may face.  I do not warrant or guarantee the quality, accuracy or completeness of any information found on this website and will not be held liable for anything contained in this document or any use you make of it. Finally, accessing the information on my website does not create a lawyer-client relationship.

Guide To Quebec Sales Tax

Apr 11, 2022 by Jeremy

Guide To Quebec Sales Tax

Those who conduct commercial activities in Quebec are required to register for both the Goods and Services Tax (GST) and the Quebec Sales Tax (QST). For new business owners, fulfilling these requirements may seem overwhelming at first. Canadian tax law can be complicated and confusing, even for those who operate outside of Quebec and are not subject to the QST. Businesses that are obligated to meet the requirements of the QST may run into even more complications. This guide to Quebec sales tax may answer some of the common questions business owners have.

If you run a business in Quebec and have questions about the QST, or if you are struggling with an assessment on your business related to the QST, GST, or other tax matters, Jeremy Scott Law is here to help. Our Canada tax lawyers are dedicated to helping our clients meet their tax obligations and avoid issues with the Canada Revenue Agency and Revenu Quebec. Contact us today at 902-403-7201 for more information.

GST and QST Requirements in Quebec

In Quebec, the goods and services tax and Quebec sales tax are collected on the sale of most types of goods and services. Some provinces use the harmonized sales tax (HST) as an alternative to the provincial sales tax and the GST. The goods and services tax is calculated as 5 percent of the selling price. According to Revenu Quebec, the Quebec sales tax is calculated as 9.975 percent of the selling price, excluding the GST. These rules are applied based on an agreement between the federal and Quebec governments. Revenu Quebec applies the GST in Quebec based on the rules instituted by the federal government.

Anyone who conducts commercial activities in Quebec must submit an application for registration to Revenu Quebec. After registering, these persons will deal with Revenue Quebec for all matters related to the QST – such as audits, investigations, tax collection, unfiled returns. Quebec based businesses that have registered for GST and HST must collect the HST on sales made in participating provinces, which include New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island.

What Businesses Are Required to Register For the GST and QST?

Businesses must register for the GST and QST if they conduct commercial activities in Quebec. To be more specific, businesses must register if the total taxable supplies (which includes sales, rentals, exchanges, transfers, etc.) and those made by their associates are more than $30,000 in a calendar quarter or the four previous calendar quarters.

However, certain types of businesses may still be required to register even if their taxable supplies are under $30,000, including:

  • Taxi business operators
  • Non-residents who charge admission to the public for activities and events that happen in Quebec
  • Tobacco retailers
  • Fuel retailers
  • Alcoholic beverage vendors
  • Those who sell or lease new tires
  • Businesses that sell or lease new or used vehicles, other than a vehicle that is the owner’s capital property, for 12 months or longer

In some instances individuals, personal trusts, or partnerships comprised of individuals that conduct business without a reasonable expectation of profit or that supply only tax-exempt property or services is may not be required to register for the GST and QST. For a more detailed guide to Quebec sales tax requirements and how they apply to your business, contact Jeremy Scott Law.

Collecting Taxes from Clients in Quebec

Registrants must collect the GST and QST when they make a taxable sale. There is an exception for zero-rated sales, which are properties and services that have taxable rates of 0 percent. Vendors of taxable goods and services are responsible for billing and collecting the GST and QST from clients and for remitting any tax amount collected to the appropriate tax authority – either the CRA or Revenu Quebec.

Calculating Input Tax Credits and Tax Refunds

Input tax credits (ITCs) and input tax refunds (ITRs) allow registrants to recover the GST and QST they have paid, or will need to pay, on taxable property and services. Inputs are property or services used or consumed during the commercial activities of a business. A business may file ITC or ITR claims if the business was a registrant during the period in which the goods and services tax was paid, or in the period in which the tax became payable.

According to Revenu Quebec, some common business inputs that qualify for ITC and ITR claims include:

  • Office furniture
  • Computer systems
  • Accountant fees
  • Taxi fares
  • Machine repair costs
  • Promotional items
  • Tools

Filing GST and QST Returns Each Reporting Period

Registered businesses are required to file a GST and QST return for each reporting period, even if the business is not entitled to a refund or has no amount payable. When filing this return, the business must calculate the GST and QST it collected and the GST and QST it was required to collect during the reporting period. Additionally, the business needs to calculate the GST and QST it paid or was required to pay that entitled the business to input tax credits and input tax refunds.

If the difference between these two numbers is positive, that number is the net tax that must be remitted to Revenu Quebec or the CRA. If the difference is negative, that number is the refund the business will receive. In either case, the business must consider any adjustment it has made before the filing deadline.

How a Tax Lawyer Can Help with the Quebec Sales Tax

Running a successful business takes hard work and involves a wide array of responsibilities, including meeting the required province and federal tax obligations. While business owners are free to handle their taxes on their own, the Canadian and Quebec tax systems are complicated, and filing accurate returns can be difficult and time-consuming. This is why many businesses with sales in Quebec turn to the services of tax lawyers for assistance. At Jeremy Scott Law, our tax lawyers help Canadian businesses handle all of their taxes so that they can focus on the other important aspects of running their business. For more information related to our guide to Quebec sales tax or other tax matters, contact us today at 902-403-7201.

If you found this information valuable, I encourage you to check out my other blog posts.

The Disclaimer:

Please note the content above and throughout this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.  I urge you to seek specific legal advice by contacting me (or your current legal counsel) regarding any legal issues you may face.  I do not warrant or guarantee the quality, accuracy or completeness of any information found on this website and will not be held liable for anything contained in this document or any use you make of it. Finally, accessing the information on my website does not create a lawyer-client relationship.

Changes to ITC Information Requirements

Apr 4, 2022 by Jeremy

Changes to ITC Information Requirements

In April 2021, the Canadian government implemented changes to ITC information requirements, which could have major implications for Canadian businesses. These changes are expected to make claiming Canadian Input Tax Credits (ITC) easier for business owners. Business owners should be aware of these changes and ensure that they follow the new regulations in order to avoid any potential problems with the Canada Revenue Agency and provincial tax agencies.

If you are a Canadian business owner with questions regarding the ITC changes or other tax-related concerns, the Canadian tax lawyers at Jeremy Scott Law are prepared to provide answers and assist you with any tax issues you may have. Contact our experienced Canadian tax lawyers today at 902-403-7201 for more information.

What Are Canadian Input Tax Credits?

According to the Canada Revenue Agency, businesses who are registered to pay the goods and services tax (GST) or harmonized sales tax (HST) can recover these tax payments by claiming input tax credits (ITCs). A business may only claim ITCs if their purchases and expenses are directly related to use, supply, or consumption in the commercial activities of the business. In order to claim an ITC, the expenses or purchases have to be reasonable in cost, nature, and quality related to the nature of the business.

Some of the most common types of purchases and expenses that qualify for ITC claims include:

  • Startup costs for the business
  • Expenses related to the use of a home as a business, such as utilities, maintenance, repairs, etc.
  • Delivery, freight, and fuel costs
  • Fees for lawyers, accountants, and other professional services
  • Repairs and maintenance
  • Meals and entertainment (only the allowable part – usually 50 percent of the lesser between the amount incurred for expenses or a reasonable amount given the circumstances)
  • Motor vehicle expenses
  • Office expenses
  • Rental costs
  • Telephone and utility bills
  • Travel expenses

How the ITC Information Requirements Have Changed

There are two main changes to ITC information requirements, which went into effect on April 21, 2021. First, the dollar thresholds for the ITC information requirements have increased. Second, the definition of “intermediary” has been expanded and now includes billing agents. Here is a closer look at these changes.

Increased ITC Information Requirement Thresholds

According to Section 169 (4) of the Excise Tax Act, GST registrants who wish to claim an ITC for a particular reporting period must first gather satisfactory evidence that allows the amount of the input tax credit to be accurately determined, including any information that may be prescribed.

The Canada Revenue Agency outlines three different levels of information requirements based on the amount paid or payable. Previously, the three levels were less than $30, between $30 and $149.99, and $150 more. The new ITC information requirements have increased these thresholds to less than $100, between $100 and $499.99, and $500 or more. These changes allow businesses to collect less information regarding ITC claims for supplies that are valued at less than $500.

Expanded Definition of Intermediary

The new changes to ITC information requirements allow registrants to obtain inter alia, the name of the business and registration number of the supplier or the intermediary. According to

or in an agreement with the person and causes or facilitates the supply to the person. The new budget expands this definition to include billing agents. Before, billing agents were not eligible to be claimed as intermediaries because they were usually not agents related to the making of the supply. These agents were limited to charging and collecting the GST and HST. Under the new regulations, billing agents are deemed the same as full agents.

This means that businesses can now partially fulfill the ITC information requirements by providing a business name and GST registration number for a billing agent. For many recipients, these changes will simplify the information they need to provide when claiming ITCs. You can learn more about how the changes to ITC information requirements will affect your business by contacting Jeremy Scott Law.

Who Is Eligible to Claim an ITC in Canada?

In order to qualify for ITC claims in Canada, all of the following circumstances must be met:

  • The applicant acquired, bought into, or imported property or services for consumption, use, or supply in a participating province for commercial activities.
  • The applicant must be a GST or HST registrant during the reporting period that the GST/HST was paid or became payable for services or properties.
  • The GST or HST had to have been paid or payable by the applicant, regarding the supply, importation, or bringing in of the property or services.
  • Sufficient documentary evidence must be gathered in order to prove the ITC before making the claim on a GST or HST return.
  • The ITC must be claimed in a GST or HST return filed within the designated time constraints.

In Canada, businesses with total yearly revenue of less than $400,000 are eligible to use the quick method of accounting, which is an alternate way to calculate the GST/HST that must be paid. This method is designed to reduce bookkeeping costs and paperwork for small businesses. Businesses that use the quick method are not eligible to claim an ITC for operating expenses. However, these businesses can still claim ITCs for specific types of purchases, such as land and purchases that qualify for the capital cost allowance, such as vehicles, computers, and other types of large equipment.

Contact an Experienced Canada Tax Lawyer for Legal Guidance

If you are a business owner feeling overwhelmed by taxes, an experienced Canada tax lawyer may be able to guide you through the requirements. Tax lawyers help their clients fulfill all of their tax obligations and take advantage of all tax filing methods that can help their business. Additionally, a tax lawyer can help businesses deal with government audits and other difficult tax situations. Jeremy Scott Law takes pride in helping Canadian businesses and individuals prosper through assistance with their taxes. Contact us today at 902-403-7201 for information about changes to ITC information requirements or any other tax concerns you may have.

Deferral Of GST And HST Taxes

Mar 9, 2022 by Jeremy

Are you Facing Challenges as a result of the Deferral of your GST/HST

In an effort to support distressed businesses during the COVID-19 pandemic, the Canada Revenue Agency (CRA) extended the time limit for business owners to file certain tax amounts collected, including GST and HST taxes. However, the deferral of GST and HST taxes may lead to more aggressive collection efforts by the CRA and may wreak havoc to businesses whose corporate officers can be held jointly and severally liable for these debts, pursuant to the Excise Tax Act. In fact, audit activity by the CRA is ramping up, including in the areas of the GST/HST taxes. Jeremy Scott Law explains these issues below. If you need assistance with an audit or the payment of deferred GST/HST taxes, consider contacting Jeremy Scott Law at 902-403-7201.

What Is the GST/HST?

GST stands for “goods and services tax,” while HST stands for “harmonized sales tax.” GST/HST is considered a “value-added tax.” When a taxpayer purchases goods or services, they pay GST/HST. When the taxpayer sells a product or service, it collects GST/HST from the purchaser. The taxpayer deducts the amount they paid for goods and services from the amount they collected from buyers and remits the difference to the CRA.

The GST applies nationally. These provinces harmonized their provincial sales taxes with the GST to implement the HST:

  • New Brunswick
  • Newfoundland and Labrador
  • Nova Scotia
  • Ontario
  • Prince Edward Island

Typically, the HST operates the same way as the GST and has the same tax base. Provinces with GST only charge 5% while those with the GST and HST have a combined rate of 15%, or 13% in Ontario.

There are specific rules about registering to collect GST/HST taxes and when taxes must be remitted to the taxing authority. Vendors are responsible for preparing a GST/HST return and remitting the difference for each reporting period.

Sales Subject to GST/HST

The GST/HST is a consumption tax that applies to the sales of most goods and services, including:

  • Sales and leases of commercial real property
  • Sales of services
  • Sales of software, SaaS, and digital products
  • Sales of tangible personal property

There are complex rules surrounding where to source these sales that depend on the nature and characterization of sales. Generally, the sale of tangible personal property is sourced to the location where the purchaser has the goods delivered. Sales of services are typically sourced to the recipient’s address. Sales of intangible personal property are generally sourced to the location where the contract says the rights can be used.

Deferral of GST/HST Taxes

The CRA deferred the remittance of various taxes and the preparation of certain tax returns in light of the COVID-19 pandemic. Specifically, the CRA took the following actions:

  • Extended the date for monthly filers to remit GST/HST payments for February, March, and April 2020 to June 30, 2020
  • Extended the date for quarterly filers to remit amounts of GST/HST for January 1 through March 31 reporting period to June 30, 2020
  • Extended the date for annual filers whose GST/HST return was due in March, April, or May 2020 to remit payments to June 30, 2020
  • Waived penalties for the late filing of GST returns that were filed by June 30, 2020
  • Waived arrear interest on GST/HST return tax debts from April 1, 2020, to June 30, 2020

While the deferral expired on June 30, 2020, businesses that were still experiencing COVID-19 related difficulties were allowed to apply for continuing payment delays.

Additional deferrals were provided by specific provinces, such as waived penalties for missed filings that occurred earlier in the year of 2020 or the extension of sales tax returns to October 20, 2020, for Manitoba small and mid-sized businesses.

Legal Issues Involved with the Deferral of GST/HST Taxes

While the deferral of GST/HST taxes helped struggling businesses during the early days of COVID-19, several legal issues surrounding this tax policy are still lingering, such as:

Trouble Paying

Some businesses may have reallocated the funds they received as payments for these taxes to other pressing business needs and may still have trouble paying off the amounts they deferred. They may need help negotiating a reasonable repayment with taxing authorities.

 

Personal Liability

 

Corporate officers can be held personally liable for the difference in the GST/HST taxes they fail to remit. It is not yet clear whether the CRA plan to hold directors personally liable for the deferral to remit the owed taxes if the officers fail to remit the net taxes when the deferral period ends.

People who are facing personal liability often contact a tax lawyer like Jeremy Scott Law who can advocate for them or raise applicable defenses.

 

Due Diligence Defence

Personal liability can be avoided if a taxpayer successfully proves a due diligence defence. This requires the officer show they exercised the degree of care, diligence, and skill that a reasonably prudent person would have exercised in similar situations to prevent the failure to remit the taxes. This defence is focused on the timing of the remittance, not what the officer did after they failed to remit the taxes due. Additionally, Canadian courts have repeatedly held that this defence cannot be raise if the business paid off current creditors with these funds in hopes that their financial situation would improve.

Directors may be able to strengthen their position by taking the following steps:

  • Ensure the corporation has a separate withholdings account for tax remittances
  • Require the corporation’s financial officers to regularly report on the withholdings account’s status
  • Regularly obtain confirmation that withholdings and remittances have been made
  • Establish a plan to catch up on GST/HST remittances that were not made during the deferral period

Contact a Tax Lawyer for Help with Your Deferral of GST/HST Taxes

Now that the deferral period to remit GST/HST taxes has expired, businesses that are struggling to catch up may need legal assistance from a tax lawyer who is familiar with these issues. If you need assistance with your deferral of GST/HST taxes, consider contacting Jeremy Scott Law at 902-403-7201.

If you found this information valuable, I encourage you to check out my other blog posts.

The Disclaimer:

Please note the content above and throughout this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.  I urge you to seek specific legal advice by contacting me (or your current legal counsel) regarding any legal issues you may face.  I do not warrant or guarantee the quality, accuracy or completeness of any information found on this website and will not be held liable for anything contained in this document or any use you make of it. Finally, accessing the information on my website does not create a lawyer-client relationship.

CRA Ramping Up Audits

Mar 7, 2022 by Jeremy

Audit Activity in Canada

The Canada Revenue Agency (CRA) is responsible for administering tax laws for the Canadian government, including most provinces and territories. During a recent Canadian Tax Foundation’s Ontario Tax Conference in Toronto, the CRA reported that it had identified $1.185 million from audits of small and medium-sized businesses for fiscal year 2018-2019. The agency found $625 million from audits of small businesses and another $560 million of audit of medium-sized businesses. This amounted to an average of $137,000 per small business audit and $338,000 per medium-sized business audits. In part due to the success of these endeavors, the CRA is ramping up audits again. The 2021 federal budget devoted $304.1 million to the CRA to help combat tax evasion and aggressive tax avoidance, which it expects to translate into the recovery of $810 million in revenues over five years. Jeremy Scott Law provides information about the recent increase in CRA audits and how you can prepare. If you need assistance with the audit process or targeted legal advice based on your unique situation, you might consider contacting Jeremy Scott Law at 902-403-7201.

CRA Audits

CRA audits are an important part of the agency’s duties because they help ensure the tax system is fair for everyone and protect tax revenues for the government. When the CRA audits a taxpayer, its representatives carefully examine the taxpayer’s records and books to determine if they are fulfilling their tax obligations and following tax laws. According to the Canadian government, the CRA selects which taxpayers to audit based on a risk assessment that considers such factors as:

  • Information the CRA has on file for a particular taxpayer
  • Information the CRA has for similar taxpayers
  • Results of previous investigations or audits
  • The likelihood of error in tax returns
  • The frequency of errors in tax return
  • Whether there are indications of non-compliance with tax obligations

By focusing its resources on the highest risk files, the CRA can make the biggest fiscal impact. Fiscal impacts consist of the following:

  • Gross assessed federal and provincial taxes
  • Reduction of tax refunds
  • Interest and penalties
  • The present value of future federal tax assessments arising from compliance actions

Consequences of Tax Evasion

If the CRA determines that tax errors rise to the level of tax evasion, the taxpayer can face significant consequences imposed by the government, which may include:

  • Up to five years imprisonment
  • The requirement to pay the full amount of taxes owed
  • Interest and civil penalties
  • Fines up to 200% of the taxes evaded
  • A criminal record that can negatively impact the taxpayer for years to come

Taxpayers who are facing accusations of tax evasion should consider reaching out to Jeremy Scott Law to protect their legal rights and evaluate their options.

Areas Where CRA Is Ramping Up Audits

While the CRA can audit any taxpayer, the following tax issues may increase the likelihood of a CRA audit:

CEWS Applications

As of March 25, 2021, the CRA had processed and approved Canada Emergency Wage Subsidies (CEWS) valued at more than $71 billion in payments. Now, the CRA is cracking down on taxpayers it suspects of deliberate non-compliance. If CEWS funds were misused, taxpayers can be required to repay the subsidy, along with an additional 25% penalty.

 

GST/HST Refund and Rebate Claims

The CRA is actively increasing its audits of large businesses with a high risk of non-compliance and in specific industries that it considers high-risk, such real estate development. It is looking for fraudulent or unwarranted GST/HST refund and rebate claims, such as the New Housing Rebate.

 

Small Businesses

Business tax returns are carefully scrutinized by the CRA. Small businesses are particularly vulnerable to being audited by the CRA when they do not have a department dedicated to taxes and compliance. Small businesses may be more likely to be audited if they:

  • Have revenue discrepancies, such as one number on a specific tax form and a different number on another tax form or different information reported by a financial institution than what the taxpayer reported
  • Have revenue much higher or lower than what is typical in the industry
  • Claim the home office deduction
  • Are run as a cash-intensive business
  • Have large business deductions for items such as meals and entertainment, travel, advertising, marketing, and interest
  • Claim 100% business use of a vehicle when no other vehicle is available for personal use
  • Have significant changes in shareholder loans and large balances
  • Have recurring losses
  • List family members on the payroll
  • Make large charitable deductions

Self-Employment

Taxpayers who receive their income through self-employment are also more likely to be audited. Self-employed individuals must maintain accurate and organized records in case they are ever audited and need to substantiate their revenue or expenses.

Trusts

The CRA is becoming increasingly aware of various ways taxpayers use to avoid taxes, including the use of trusts. Expect greater scrutiny if trust transactions include cross-border activities, low/nil tax counties, or non-arm’s length transactions.

Shareholder Benefits

The CRA is also paying more attention to officers and employees using corporate assets for personal use, such as private jets or yachts.  

 

Cryptocurrency Transactions

If gains or income are made from cryptocurrency transactions, the CRA may carefully follow these transactions to ensure that the proper amount of taxes have been paid. Generally, these transactions are treated a business income or capital gains.

Transfer Pricing Transactions

The CRA is also increasing scrutiny into tax files involving the purchase or sale of goods or services with another entity within the same multinational group. These types of transactions must comply with specific requirements and be supported by relevant records. 

Contact a Tax Lawyer for Help with Your CRA Audit

Now that CRA is ramping up audits, you might be considering getting legal assistance. A tax lawyer from Jeremy Scott Law can give you ongoing tax advice to hopefully avoid such audits or represent you during the audit process if you have been informed of an audit. Consider contacting the firm at contacting Jeremy Scott Law at 902-403-7201 for help with your CRA audit.

If you found this information valuable, I encourage you to check out my other blog posts.

The Disclaimer:

Please note the content above and throughout this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.  I urge you to seek specific legal advice by contacting me (or your current legal counsel) regarding any legal issues you may face.  I do not warrant or guarantee the quality, accuracy or completeness of any information found on this website and will not be held liable for anything contained in this document or any use you make of it. Finally, accessing the information on my website does not create a lawyer-client relationship.

Canada Sales Tax Guide To GST, HST and PST

Feb 3, 2022 by Jeremy

According to data provided by the Government of Canada, goods and services tax (GST) accounted for more than 3.2 billion CAD in revenue for the fiscal year 2020-2021. GST, along with the harmonized sales tax (HST), and non-refundable provincial sales tax (PST), all comprise a substantial portion of the country’s revenue each year.

All businesses – whether resident or non-resident – that sells goods or services in Canada must understand when to pay or collect the applicable GST, HST, and/or PST, depending on the specific location in which the good or service is being sold. Not every province has adopted the HST. As such, a Canada sales tax guide is a helpful tool for any business wishing to sell goods or services in Canada. Consider reaching out to Jeremy Scott Law for further Canadian tax guidance by calling (902) 403-7201 today for an initial consultation.

What Is the Goods and Services Tax (GST) in Canada?

The GST is Canada’s federal sales tax, which is applicable to most goods and services sold in Canada, as well as the sale of real property, intangible personal property, and digitized products downloaded from the internet. However, the way the GST is collected differs by province or territory. Presently, the federal GST rate in Canada is 5 percent.

The GST has become a major topic for non-resident and digital businesses selling goods and services in Canada. According to the Canada Revenue Agency (CRA), as of July 1, 2021, many digital businesses will be responsible for paying the GST. Because non-resident digital businesses (many of which are based in the United States) may be unfamiliar with Canadian tax law, utilizing a Canada sales tax guide to a critical tool to legal compliance.

What is the Harmonized Sales Tax (HST) in Canada?

The HST is a combination of the federal GST and a province’s provincial tax rate (where the province has opted into the harmonized tax system). The HST rate includes the 5 percent GST plus the local, provincial tax rate, which is typically between 8 and 10 percent.  As such the total combined HST rate (inclusive of both the federal and provincial portions) is currently 13 or 15 percent. Whether a province has adopted the HST is critical when planning to operate a business in Canada (either physically or virtually). At Jeremy Scott Law, we ensure our clients have a solid understanding of their legal rights and obligations when choosing to sell goods or services in Canada.

What Is the Non-Refundable Provincial Sales Tax (PST)?

The PST is a province’s local sales tax and is charged separately from the GST.  It is found only in some some provinces. As further identified in the table below, the PST is known as the retail sales tax (RST) in Manitoba, and known as the Quebec sales tax (QST) in Quebec. This table provides a basic Canada sales tax guide for businesses who are beginning the process of considering the sale of goods or services in Canada.  Please note these are the rates as of February 1, 2022 and should be confirmed with the appropriate tax authorities.

Canadian Sales Taxation Table

PROVINCEPST/RST/QSTGSTHSTTOTAL
AlbertaN/A5%N/A5%
British Columbia7% (PST)5%N/A12%
Manitoba7% (RST)5%N/A12%
New BrunswickN/AN/A15%15%
Newfoundland/LabradorN/AN/A15%15%
Northwest TerritoriesN/A5%N/A5%
Nova ScotiaN/AN/A15%15%
NunavutN/A5%N/A5%
OntarioN/AN/A13%13%
Prince Edward IslandN/AN/A15%15%
Quebec9.975% (QST)5%N/A14.975%
Saskatchewan6% (PST)5%N/A11%
YukonN/A5%N/A5%

How a Canada Tax Lawyer Can Help Your Business

Following federal and provincial/territorial tax laws is paramount to avoiding an audit, along with potential monetary and criminal consequences. Canada’s sales tax structure can be complex and challenging, and businesses considering the sale of goods or services in Canada may find it helpful to work alongside an experienced and knowledgeable Canadian tax lawyer. Working with a legal professional is especially important to consider for businesses that are not based in Canada, as many non-resident businesses have flooded the goods and services industry in Canada.

Assistance Registering a Business for GST/HST

With the recent change in Canadian tax laws, businesses may not know whether they need to register for the GST/HST. Businesses that are non-residents or businesses that sell digital products must follow a new set of requirements. A Canada tax law guide provided by a qualified lawyer can help to answer the general questions many new businesses may have.

Additionally, a business may be involved in an ‘exempt’ activity and may not be obligated to register for and collect the GST/HST or PSTs. A failure to register as required under Canadian tax law is certainly a legal misstep that every business should avoid. With the influx of online businesses that sell products through Amazon and other marketplaces (with many of these online businesses being located in the United States), an entirely new industry will need to adapt to current goods and services tax laws in Canada.

Avoiding Costly Mistakes

Under Canadian tax laws, some items are exempt from GST, HST, and/or local, provincial taxes. Additionally, a business may not be responsible for collecting sales taxes if the business does not meet certain minimum revenue thresholds.  In addition, some businesses mistakenly believe certain goods and services they sell in Canada are exempt from sales tax when they are not.

A minor misunderstanding of the law can have astronomical financial and legal consequences. Whether intentional or not, a failure to comply with Canadian tax laws may result in a wide range of legal consequences, and may even leader to a business being prohibited from selling goods and services in Canada. A qualified Canada tax lawyer provides businesses with the information they need to ensure minor mistakes do not have catastrophic consequences.

Contact Canada Tax Lawyer Jeremy Scott Today

Are you a business selling goods or services in Canada? Are you a business planning to sell goods or services in Canada, whether in a storefront or online? If so, a Canada sales tax assessment may be right for you. At Jeremy Scott Law, we assist businesses with various tax matters, including issues involving GST, HST, and PST. To schedule an initial consultation to discuss your situation, and receive answers to your tax questions, contact our office today by calling (902) 403-7201.

If you found this information valuable, I encourage you to check out my other blog posts.

The Disclaimer:

Please note the content above and throughout this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.  I urge you to seek specific legal advice by contacting me (or your current legal counsel) regarding any legal issues you may face.  I do not warrant or guarantee the quality, accuracy or completeness of any information found on this website and will not be held liable for anything contained in this document or any use you make of it. Finally, accessing the information on my website does not create a lawyer-client relationship.