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.
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.
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